2004 Annualreport

The central objective of PUMA’s corporate strategy is to become the most desirable Sportlifestyle brand in the world. To accomplish this goal, PUMA aims to achieve desirability by combining design and innovation, a clear distribution channel strategy, and brand building marketing initiatives.

Innovation has been a constant throughout PUMA’s history and a cornerstone of PUMA’s growth over the past several years. By incorporating diverse sport and lifestyle influences into our products and by always asking ourselves how can we do things differently, we have forged a unique look and aesthetic identity. And to help ensure that PUMA continues to develop fresh and exciting product, we have adopted an organizational structure that is 2004 geared towards recognizing and incubating ideas throughout the company. The ANNUALREPORT result should always be truly innovative product that reflects our long tradition of top performance combined with distinctive and unique PUMA signature design.

PUMA’s distribution is equally important in contributing to brand desirability by making sure the right products get to their targeted consumers in the proper channels. Our distribution system also works together with product lifecycle management that enables us to control brand visibility and extend PUMA’s market potential.

Desirability is further enhanced by marketing that develops the brand as an icon at the epicenter of sportlifestyle, creating sustainable brand equity.

PUMA supports these efforts with a continuous drive to improve operational efficiency. Our decentralized organization allows for the placement of our competencies in locations where they will be most effective and enables PUMA to realize speed and efficiency throughout the supply chain, and ultimately to better service both our wholesale customers and our end consumers.

puma.com PUMA Year-on-Year Comparsion

2004 2003 € million € million Deviation

Sales Brand sales 2,016.6 1,691.5 19.2% Consolidated net sales 1,530.3 1,274.0 20.1%

Result of operations Gross profit 794.0 620.0 28.1% Earnings before interest and tax (EBIT) 365.0 263.2 38.7% Earnings before taxes (EBT) 370.7 264.1 40.4% Net earnings 257.3 179.3 43.5%

Profitability Gross profit margin 51.9% 48.7% 3.2% Return on sales before tax 24.2% 20.7% 3.5% Return on sales after tax 16.8% 14.1% 2.7% Return on capital employed (RoCE) 167.8% 121.0% 46.8% Return on equity 48.0% 46.8% 1.2%

Balance sheet information Shareholders’ equity 535.8 383.0 39.9% - Ratio of equity to total assets 57.6% 54.7% 2.9% Working capital 148.4 155.7 -4.7% - in % of Net sales 9.7% 12.2% -2.5%

Cashflow and investments Gross cashflow 385.6 280.6 37.4% Free cashflow (before acquisiton) 256.6 137.7 86.3% Investments (before acquisiton) 43.1 27.0 59.8% Acquisition investment 0.0 30.3

Value management Cashflow return on invest 42.7% 43.5% -0.8% Absolute value contribution 222.3 166.3 33.6%

Employees Employees on yearly average 3,475 2,826 23.0% Sales per employee 440.4 450.8 -2.3%

PUMA share Stock exchange rate at year-end (in €) 202.30 140.00 44.5% Earnings per share (in €) 16.06 11.26 42.7% Free cashflow per share (in €) 16.01 6.74 137.5% Equity per share (in €) 33.37 23.85 39.9% Stock market value 3,308 2,248 47.1% Average trading volume (amount/day) 141,753 125,202 13.2% PUMA Group Development

Business phase Momentum Investment Restructuring

2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 € million € million € million € million € million € million € million € million € million € million € million € million

Sales Brand sales1) 2,016.6 1,691.5 1,380.0 1,011.7 831.1 714.9 647.4 622.5 594.0 577.2 554.2 541.3 - Change in % 19.2% 22.6% 36.4% 21.7% 16.2% 10.4% 4.0% 4.8% 2.9% 6.6% 2.4% - Consolidated sales 1,530.3 1,274.0 909.8 598.1 462.4 372.7 302.5 279.7 250.5 211.5 199.5 210.0 - Change in % 20.1% 40.0% 52.1% 29.3% 24.1% 23.2% 8.1% 11.7% 18.4% 0.7% -5.0% - - Footwear 1,011.4 859.3 613.0 384.1 270.9 209.0 202.5 193.8 176.2 154.4 143.5 141.9 - Apparel 416.0 337.0 238.5 169.5 163.5 139.0 85.8 73.1 64.4 50.3 49.9 59.8 - Accessories 102.9 77.7 58.3 44.5 28.0 24.7 14.2 12.9 9.9 6.8 6.2 8.4

Result of operations Gross profit 794.0 620.0 396.9 250.6 176.4 141.7 108.2 102.3 94.0 79.0 69.5 62.8 - Gross profit margin 51.9% 48.7% 43.6% 41.9% 38.2% 38.0% 35.8% 36.6% 37.5% 37.4% 34.8% 29.9% License and commission income 43.7 40.3 44.9 37.2 28.9 23.9 24.5 25.9 25.5 26.0 27.1 21.4 Operating result / EBIT 365.0 263.2 125.0 59.0 22.8 16.3 4.7 36.3 33.3 31.0 23.1 -26.2 - EBIT Marge 23.9% 20.7% 13.7% 9.9% 4.9% 4.4% 1.5% 13.0% 13.3% 14.7% 11.6% -12.5% Result before taxes on income / EBT 370.7 264.1 124.4 57.4 21.2 14.4 3.4 37.4 33.2 26.5 17.3 -35.4 - EBT Marge (Return on sales before tax) 24.2% 20.7% 13.7% 9.6% 4.6% 3.9% 1.1% 13.4% 13.2% 12.5% 8.7% -16.8% Consolidated group profit 257.3 179.3 84.9 39.7 17.6 9.5 4.0 34.6 42.8 24.6 14.9 -36.9 - Marge (Return on sales after tax) 16.8% 14.1% 9.3% 6.6% 3.8% 2.6% 1.3% 12.4% 17.1% 11.7% 7.5% -17.6%

Expenses Expenses for marketing and retail 214.6 163.9 125.1 86.9 67.0 61.0 47.9 29.0 - - - - Cost of product development and design 36.9 29.9 24.2 19.9 18.2 15.2 15.2 7.3 - - - - Personnel expenses 157.5 126.6 103.0 81.1 64.4 51.5 41.3 35.2 - - - -

Balance sheet composition and ratios Total assets 929.6 700.1 525.8 395.4 311.5 266.6 222.9 176.6 147.7 106.5 100.0 121.9 - in % of total assets 57.6% 54.7% 48.0% 44.7% 42.1% 42.1% 43.8% 54.7% 41.7% -12.8% -38.1% -43.5% Net working capital 148.4 155.7 114.0 110.3 78.8 76.6 70.6 69.6 21.2 17.8 6.6 34.1 - thereof: inventories 201.1 196.2 167.9 144.5 95.0 85.1 63.4 58.4 41.9 36.9 33.3 44.0

Cashflow Free cashflow 256.6 107.4 100.1 3.0 9.1 0.8 -12.1 -8.6 39.5 17.7 39.7 -4.6 Net cash position 356.4 173.8 94.3 -7.8 4.8 1.1 7.8 22.0 34.5 4.7 2.5 -50.7 Investment (incl. Acquisitions) 43.1 57.3 22.5 24.8 9.4 14.3 15.7 4.1 2.9 1.8 1.4 2.9

Profitability Gross profit margin 48.0% 46.8% 33.7% 22.5% 13.4% 8.5% 4.1% 35.8% - - - - Return on sales before tax 167.8% 120.7% 81.1% 32.8% 20.6% 17.8% 6.8% 41.4% - - - - Return on sales after tax 42.7% 43.5% 32.2% 20.3% 13.8% 11.1% 4.6% 18.3% - - - -

Additional information Orders on hand on Dec. 31 822.6 722.0 531.1 360.1 232.1 187.2 133.5 130.8 111.4 90.9 94.4 85.2 Number of employees on Dec. 31 3,910 3,189 2,387 2,012 1,522 1,424 1,145 1,078 807 745 703 714 Number of employees on yearly average 3,475 2,826 2,192 1,717 1,524 1,383 1,149 1,041 795 728 725 1,012

PUMA share Price of the PUMA share on Dec. 31 202.30 140.00 65.03 34.05 12.70 17.20 11.25 18.61 26.29 18.41 14.93 7.75 Earnings per share (in €) 16.06 11.26 5.44 2.58 1.14 0.62 0.26 2.25 1.98 1.76 1.06 -2.63 Average outstanding shares (in million) 16.025 15.932 15.611 15.392 15.390 15.390 15.390 15.390 15.390 14.000 14.000 14.000 Number of shares on Dec. 31 (in million) 16.062 16.059 15.846 15.429 15.390 15.390 15.390 15.390 15.390 14.000 14.000 14.000

1) including sales of licensees

Foreword 06

Mission 08

Management Report 11 Sustained Positive Development of Sales and Earnings 13 Development of the World Economy 14 Strategy of the PUMA Group 15 Sales 16 Results of Operations 19 Dividend 21 Regional Development 22 Net Assets and Financial Position 24 Cashflow 26 Value-Based Management 28 Product Development and Design 30 Sourcing 31 Employees 32 Risk Management 34 Orders Position 36 Outlook 37

Share 39

Marketing 41

Consolidated Financial Statements - IFRS - 59 Consolidated Balance Sheet 60 Consolidated Income Statement 61 Consolidated Cashflow Statement 62 Changes in Equity 63 Appendix to the Financial Statements 64 Consolidated Financial Statements 65 Auditor’s Report 91

Report of Supervisory Board 92

Board of Management 94

inhalt

05 Dear Fellow Shareholder,

2004 was another remarkable year in the development of our company and brand. Our financial results continued to outperform the industry by any measure and we enhanced PUMA’s position as a brand icon at the epicenter of today’s overlapping worlds of Sport, Lifestyle and Fashion. At the same time, we took many steps toward ensuring that our organization is capable of handling the increased demands of success and provides a solid foundation for PUMA’s long-term plans.

In many ways, 2004 was a year of both financial continuation and new milestones. Our branded sales grew for the 11th straight year, reaching over €2 billion for the first time. Consolidated sales grew 20% to €1.5 billion, marking the 10th consecutive year of growth. Our gross profit margin substantially outpaced the industry at 51.9%, marking the first time in industry history (as far as we can tell) that one of the major companies recorded a full year GPM over 50%. Net earnings, which improved faster than sales for the 6th consecutive year, increased 44%. We’re quite pleased that our consistency over the past several years is now just as noteworthy as our 2004 record results.

Most importantly, we delivered value to your investment in PUMA. Our return on equity once again led the industry by a substantial margin at 48%. The end result of our financial performance was an appreciation of 45% in your share price in 2004. Since we initiated Phase II of PUMA’s long-term growth strategy in 1998, the PUMA share has risen from €11.25 to €202.30 at the end of 2004.

We have been able to generate these returns in part by giving PUMA a voice that has helped to define the concept of Sportlifestyle, and 2004 provided several opportunities to reaffirm our category leadership. The Summer Olympics provided a world stage for us to show that the tiny island nation of Jamaica not only produces some of the fastest humans in the world, but also enjoys a distinctive cultural blend of sport and fun. Earlier in the summer our partnership with the Italian National Team led our marketing efforts at the European Football Championships, where the Azzuri played along with three other PUMA-sponsored teams – Czech Republic, Switzerland and Bulgaria. In our “Two Sides, One Goal” campaign, we focused on the role that the fans play in supporting their team. Towards the end of 2004 we formed partnerships with seven-time Formula One world champion Michael Schumacher and the Ferrari team, which are kicking into high gear in 2005. And with their reputation for tradition, design, Italian flair, performance and luxury, Ferrari is yet another perfect fit with the PUMA brand.

Meanwhile, our overall brand campaign, “Hello”, evolved in 2004 to incorporate PUMA-sponsored athletes in the ads. Shot by well-known fashion photographer Juergen Teller, “Hello” provides depth to our brand message by communicating layers of emotion and spontaneity while simultaneously reaffirming PUMA’s relevance to top-level athletes in a brand-appropriate way. Of course, the common thread between these campaigns is that they all support PUMA’s values: A new way of looking at sport, discovery, performance, design, spontaneity, imagination, innovation, and very importantly, individuality.

06 Some of PUMA’s achievements in 2004 with which I am most pleased are the ones you rarely, if ever, hear about: The transformations in our organization and operations creating the framework that will enable PUMA to handle tomorrow’s demands. Over the past year we continued to focus on our distribution strategy, finding ways to improve even further an already sophisticated and successful system. We also made significant organizational changes in order to streamline our product development process. And we introduced a new global supply chain information technology system that allows us to substantially improve our speed-to-market and inventory management.

In other words, we have taken advantage of our momentum to make the necessary improvements to provide PUMA with a rock-solid foundation for future growth. Of course, it is a testament to our outstanding team that it has taken these steps while seamlessly managing our development over the past several years – no small feat.

Though steeped in history, PUMA is a place where retrospection of this sort is rare and brief. Instead, we continue to look ahead with excitement about our many opportunities to further develop our brand and organization – while always being aware of the risks involved. We have significant untapped potential in the world’s largest sportswear market – the United States. The rise of a more expressive and aspirational consumer culture in emerging Asian markets leaves us optimistic about our long-term growth prospects in the region. And our apparel and accessories products are just beginning to establish the same strong point-of-difference that enabled our footwear to reinvent the category.

But perhaps above all, we are optimistic because Sportlifestyle has proven to not merely be sustainable, but in fact to be a rapidly evolving integral part of a global culture. Increasingly, consumers are regarding sport as something deeper than competition or hero-worship, and more as a philosophy or lifestyle that has a direct connection to their personal values, aesthetics and aspirations. And PUMA is well positioned to continue leadership of this expanding segment.

It is clear that the future still holds considerable opportunity for PUMA as a strong global brand in the international market. But our success is far from assured. After all, our end objective is simply stated but difficultly achieved: We aim to outperform the industry, not just today but also in the long run. And our industry is highly competitive with new challenges constantly arising from competitors and the market itself. Our results have given us excellent strategic flexibility as we progress towards the completion of Phase III and in preparation of Phase IV of the company’s developement plan.

Best regards,

Jochen Zeitz

07 Brand - „to be the most desirable Sportlifestyle brand”

08 Corporate - „to be the first truly virtual sports company”

09 10 Management Report Sustained Positive Development of Sales and Earnings 13 Development of the World Economy 14 Strategy of the PUMA Group 15 Sales 16 Results of Operations 19 Dividend 21 Regional Development 22 Net Assets and Financial Position 24 Cashflow 26 Value-Based Management 28 Product Development and Design 30 Sourcing 31 Employees 32 Risk Management 34 Orders Position 36 Outlook 37

11 12 In the 2004 financial year PUMA continued the positive development of

previous years and expanded its position as an desirable Sportlifestyle

brand even further. The financial targets set at the beginning of the year

were significantly exceeded. The financial year closed with double-digit

growth for the sixth consecutive year. For the first time, worldwide brand

sales reached the € 2 billion mark with a Sustained Positive Development of currency-adjusted increase of over 21%. Sales and Earnings Consolidated sales rose to 23% and

reached a new record high of over € 1.5 billion. In addition to the

extraordinary sales growth, the gross profit margin likewise climbed to a

new record high of almost 52%. Pre-tax profit reached € 371 million,

growing faster than sales for the sixth consecutive year. Earnings per share

jumped from € 11.26 to € 16.06. At year-end, PUMA’s share was listed at

€ 202.30. This corresponds to another significant value increase of 45%

compared to the price at the end of the previous year.

13 Development of the World Economy

According to a value assessment of the “Kiel Institute for World The major sports events in the year 2004 also had a positive Economics,” the world economy maintained its upswing in 2004 impact on the sporting goods industry. Despite limited consumer but lost some momentum from the spring onward. This spending, additional growth was reported in nearly all markets. weakening is attributable in part to a tightening of previously Overall, PUMA has achieved strong global positioning as a expansive economic policy. Although the impetus of US fiscal Sportlifestyle brand, resulting in a competitive advantage and policy had lost most of its momentum, monetary conditions enabling adaptation to constantly changing market conditions. nevertheless remained clearly positive. China took administrative The selective distribution strategy will anchor and further expand measures to slow down the excessive economic boom. Economic the desirability of the brand. activities were additionally dampened by the steep rise in oil prices. However, the negative effects of oil price increases were buffered by economic expansion in various regions of the world.

The economic recovery also continued in the Euro zone over the course of the year. Real gross domestic product grew faster than in the second half of 2003. In general, however, development in the Euro Zone differed significantly from country to country.

14 Strategy of the PUMA Group

The course was set for lasting future success as early as 1993; in Following the successful completion of Phases I and II, the year subsequent years, the strategic development of the brand was 2002 saw the rollout of Phase III of corporate planning a year implemented by means of systematic corporate planning. The earlier than originally planned. The goal of Phase III is to achieve focus of Phase I (1993-1997) was on restructuring with the full utilization of the brand potential by further increasing the aim of establishing a sound financial base for the future. The desirability of the brand. main emphasis of Phase II was on brand investment and the transformation from a traditional sporting goods manufacturer to The main cornerstones of strategic corporate planning during a Sportlifestyle Group. Phase III (2002-2006) are:

Brand With its successful positioning as a unique Sportlifestyle brand, PUMA wants to get a clear edge over competition.

Marketing Unconventional and creative concepts ensure the seamless interplay of elements from sports, lifestyle and fashion that give the brand its unique image.

Product and Market Segmentation With clear product and market segmentation, PUMA is able to appeal equally to athletes as well as lifestyle consumers. PUMA incorporates influences from the entire spectrum of Sportlifestyle Basic Styles Sport Performance Sport Lifestyle Luxury Sports to develop creative and innovative products. From a marketing perspective, PUMA responds to the different requirements of consumers in four product stations.

SPORT SPORTLIFESTYLE FASHION Distribution A selective distribution policy ensures that the various products reach their respective consumer group.

Retail The targeted expansion of PUMA’s own retail outlets is a component of the company’s strategic planning and offers an ideal platform for presentation of the brand and its products. Moreover, PUMA benefits from direct contact with end consumers.

Profitability and Value-Based Management Profitability and sustained increase in corporate value provides the standards for strategic and operative decisions. Cashflow Return (CFROI) Gross Investment Basis (GIB)

15 Sales

Global Brand Sales Set New Record at € 2 billion

PUMA’s worldwide brand sales, which include consolidated and license sales, rose (currency-adjusted) by 21.3% or, in Euro, by 19.2% to over € 2 billion in 2004.

2,400 Worldwide sales (million €) 2,000

1,600

1,200

800

400 Licensees 0 PUMA Group 2000 2001 2002 2003 2004

Footwear sales improved by 14.8% to € 1,127.1 million (currency-adjusted 17.4%) Apparel sales by 22.4% to € 710.4 million (currency adjusted 25%), and Accessories by 38.4% to € 179.2 million (currency-adjusted 40.6%). 2,400 Worldwide sales by product segments The individual segments contributed to 2,000 (million €) worldwide sales as follows: Footwear 1,600 55.9% (58.0%), Apparel 35.2% (34.3%) and 1,200 Accessories 8.9% (7.7%). 800

Accessories 400 Apparel 0 Footwear 2000 2001 2002 2003 2004

In regional sales, Europe contributed to worldwide sales with a share of 57.1% (56.4%), America with 17.7% (17.7%), Asia/Pacific with 22.8% (23.9%), and Africa/Middle East with 2.5% (2.0%). 2,400 Worldwide sales by regions (million €) 2,000

1,600

1,200

800 Africa/Middle East Asia/Pacific Rim 400 America 0 Europe 2000 2001 2002 2003 2004

16 Consolidated Sales up by 23%

PUMA closed 2004 with yet another record and succeeded in raising its consolidated sales to a level that was once again significantly above the industry average. Currency-adjusted consolidated sales rose by 22%. In Euro, the increase was 20%, from € 1,274.0 2004 1,530.3 Consolidated sales million to € 1,535.0 million. (million €)

2003 1,274.0

2002 909.8

2001 598.1

2000 461.5

0 400 800 1,200 1,600

Strong Growth in all Segments

Sales in the largest segment, Footwear, were up 17.7%, Accessories sales, consisting mainly of bags, balls and sport climbing from € 859.3 million to € 1,011.4 million, which accessories, were up 32.4%, moving from € 77.7 million to corresponds to a currency-adjusted increase of 20.3%. With a € 102.9 million and contributing 6.7% to consolidated sales. 66.1% share of consolidated sales, Footwear continued to be The currency-adjusted sales increase was 34.6% and the highest the largest product segment. growth within the product segments.

In particular, the three main categories, 1,600 Consolidated sales by Teamsport, Running and Motorsport, were product segments significant value drivers in the Footwear (million €) 1,200 segment. The strongest growth was achieved in the Running category, where 800 sales more than doubled. Teamsport products likewise demonstrated impressive 400 Accessories development with significant double-digit Apparel growth. Strong growth was also reported 0 Footwear in the Motorsport category. As anticipated, 2000 2001 2002 2003 2004 Heritage/Originals were below the previous year’s level and in line with the general development in this category.

As expected, Apparel contributed significantly to the growth in sales. Sales were up 23.5%, rising from € 337 million to € 416 million. This corresponds to a currency-adjusted increase of 26.1%. The 27.2% share of consolidated sales underscores the growing importance of the Apparel segment. Apart from Heritage/Originals, all categories developed very positively.

17 Further Expansion of Retail Operations

The expansion of the Group’s retail operations successfully continued in the financial year. Overall, in 2004, nineteen new concept stores (Sport Boutiques) were opened worldwide. Thus, at the year-end, PUMA had over 46 Concept Stores (including 9 stores operated 200 12% Retail sales (million €) by licensees). In addition, the Group also operates sport stores and factory outlets, 150 9% thereby ensuring the regional availability of PUMA products and the controlled sale of 100 6% discontinued merchandise. The share of retail sales in consolidated sales was up to 11% 50 3% compared to 8.7% in the previous year. % of total sales 0 0% Retail sales 2000 2001 2002 2003 2004

Growth in License Sales

PUMA issues licenses for various product segments and geographic markets. These license sales are generated outside the PUMA Group and belong to the worldwide brand sales, together with consolidated sales. License sales in 2004 rose from € 417.5 million to 600 12% License sales, € 486.2 million. This corresponds to an Royalty in % 500 10% (million €) increase of 15.5%, or 17.2% before currency 400 8% changes. Adjusted for the license revenue in Japan up to the takeover as of April 1, 2003, 300 6% sales in the field of licenses grew by as much 200 4% as 27.5%. 100 2% Royalty in % 0 0% License sales The royalty and commission income from 2000 2001 2002 2003 2004 license sales rose by 8.3% to € 43.7 million, compared to € 40.3 million in the previous year, or by 17.6% after adjusting for the Japan effect.

18 Results of Operations

Management Income Statement 2004 2003 +/- % € million % € million %

Consolidated Sales 1,530.3 100.0% 1,274.0 100.0% 20.1% Cost of material 736.4 48.1% 654.0 51.3% 12.6% Gross profit 794.0 51.9% 620.0 48.7% 28.1% Royalty and commission income 43.7 51.9% 40.3 3.2% 8.3%

Selling, general and administrative expenses Marketing/Retail expenses 214.6 14.0% 163.9 12.9% 30.9% Research, design and developement 36.9 2.4% 29.9 2.3% 23.3% Other expenses 202.0 13.2% 183.3 14.4% 10.2% Total 453.4 29.6% 377.1 29.6% 20.2% EBITDA 384.2 25.1% 283.3 22.2% 35.6% Depreciation 19.3 1.3% 20.1 1.6% -4.1% EBIT 365.0 23.9% 263.2 20.7% 38.7% Financial result 5.7 0.4% 0.9 0.1% 540.7% EBT 370.7 24.2% 264.1 20.7% 40.4% Income taxes 111.7 7.3% 84.2 6.6% 32.6% Tax rate 30.1% 31.9% Minority interests -1.7 -0.1% -0.6 0.0% Net earnings 257.3 16.8% 179.3 14.1% 43.5% Weighted average shares outstanding (million) 16.025 15.932 0.6% Weighted average shares outstanding, diluted (million) 16.353 16.449 -0.6% Earnings per share in € 16.06 11.26 42.7% Earnings per share, diluted in € 15.74 10.90 44.3%

Gross Profit Margin Sets New Record

The gross profit margin is a particularly important indicator of the Regional development was as follows: In Europe, the gross company’s positive development. As a percentage of sales, the profit margin rose from 51.3% to 54.1%, in the Americas margin in the 2004 reporting year climbed to a new record high from 44.6% to 49.3%, in Asia/Pacific from 44.4% to 48.1%, and of 51.9%, up from the previous year’s level of 48.7%. This means in Africa/Middle East from 27.4% to 34.4%. an improvement of 320 basis points and a significant increase in comparison with the 1,000 55% Gross profit/ Gross profit margin level projected at the beginning of the year. (million €) 800 50% It was the highest gross profit margin in company history, which positions the 600 45% company at the upper end of the margin spread within the sporting goods industry. 400 40%

In addition to the strong desirability of 200 35% the brand, this development is also attrib- Gross profit margin utable to favorable exchange rates, an 0 30% Gross profit 2000 2001 2002 2003 2004 beneficial product mix and an increased share of company-owned retail operations. In absolute figures, gross profit was up by a total of 28.1%, rising from € 620.0 million to € 794 million.

The margin in Footwear climbed from 49.5% to 53.1%, Apparel showed an improvement from 47.1% to 49.7% and Accessories reported a margin of 49.6% compared to 46.6% in the previous year.

19 Cost Ratio at 29% of Sales

In all, operating expenses, consisting of selling, general and Other selling, general and administrative expenses were up administrative expenses, rose by 20.2% to € 453.4 million. 10.2% to € 202 million, but could be further reduced from 14.4% Despite further investments in company-owned retail operations, to 13.2% as a percentage of sales. it was possible to maintain the cost ratio as a percentage of sales at the previous year’s level 45% Operating expenses of 29.6%. in % of sales

Due to the further expansion of the company’s 35% retail operations and investments required for branding, retail and marketing costs rose by 25% 30.9% to € 214.6 million. As a percentage of sales, this corresponds to a cost ratio of 14% 15% compared to 12.9% in the previous year. 2000 2001 2002 2003 2004 Product development and design expenses remained nearly constant at 2.4% of sales, moving from € 29.9 million to 36.9 million in absolute figures, which corresponds to an increase of 23.2% compared to the previous year.

Depreciation and Amortization

Depreciation and amortization decreased slightly from € 20.1 mil- € 14.9 million to € 19.3 million. The increase mainly comprised of lion to € 19.3 million. Depreciation recorded in the previous year investments in company-owned retail operations. Goodwill included extraordinary write-downs totaling € 5.2 million. After amortization totaled € 1.7 million (previous year: € 4.8 million). adjusting for these special effects, depreciation increased from

20 Further Increase in Profitability

A sales increase, gross profit margin expansion and an Tax expenses rose from € 84.2 million to € 111.7 million. There unchanged cost ratio in comparison with the previous year led was a further drop in the average tax rate from 31.9% to to a sustained improvement in profitability. Operating profit grew 30.1%. by 38.7% from € 263.2 million to € 365 million. Thus, the high operating margin 500 25% Operating profit (EBIT) (million €) was not only maintained but even grew in 400 20% comparison with the previous year, rising from 20.7% to 23.9% of sales. All regions 300 15% contributed to the sustained increase in 200 10% operating profit. Europe climbed from

25.2% to 28.7% of regional sales, America 100 5% from 16.6% to 19.8%, Asia/Pacific from in % of sales 17.7% to 21.9%, and Africa/Middle East to 0 0% Operating profit 2000 2001 2002 2003 2004 8.6% after being 3.1% in the previous year.

Interest income was up significantly from € 0.9 million to € 5.7 million. This corresponds to a 2.3% rate of return of average net cash funds compared to 0.8% in the previous year.

Profit above Expectations

In 2004, net earnings grew faster than sales for the sixth expectations. The net rate of return of 14.1% was successfully consecutive year. With an increase of 43.5%, net profit reached increased to 16.8%. Earnings per share saw a 42.6% jump from an all-time high of € 257.3 million, compared to € 179.3 million in the previous year’s level of € 11.26 to € 16.06. the previous year. This result again exceeded management’s

Dividend

At the Annual Meeting on March 30, 2005, the Board of Management will propose a dividend distribution of € 1.00 per share from the retained earnings of PUMA AG (previous year: € 0.70 per share). This yields a total dividend distribution of € 16.1 million, 20.00 1.00 Earnings/ after € 11.2 million in the previous year, Dividend per share or an increase of 45%. (in €) 15.00 0.75

10.00 0.50

5.00 0.25

Dividend 0.00 0.00 Earnings 2000 2001 2002 2003 2004

21 Regional Development

Good Results in all Regions

European sales were up significantly by 17.6%, climbing from € 852.3 million to € 1,002.2 million. Nearly all markets in the region developed very positively, reporting double-digit growth. Europe contributed a total of 65.5% of consolidated sales. 1,200 Europe sales (million €) 1,000 +17.6% As expected, the strongest growth was +34.3% achieved in Apparel, where sales rose by 800 +58.7% 26.6%. Footwear and Accessories also 600 reported strong growth of 14.8% and 6.4%, +38.4% respectively. The continued expansion of the 400 +18.5% Group’s own retail operations likewise had a 200 positive effect on sales. 2000 2001 2002 2003 2004

Once again, profitability increased significantly in Europe. The gross profit margin climbed from 51.3% to a new high of 54.1% and the operating margin (EBIT) rose from 25.2% to 28.7%. Orders on hand reached a new high of € 567.4 million at the end of 2004. This corresponds to an increase of 9.4% compared to the previous year.

Regional sales in America increased 18.7%, rising from € 255.0 million to € 302.6 million. In US dollars this is an increase of 29.6%. America contributed 19.8% of consolidated sales. All product segments contributed to this success. Currency-adjusted, Footwear increased 30.3% (19.2% in Euro), Apparel by 21.8% (11.5%) and Accessories by 86.1% (73%).

Once again, significant new growth of 20.6% 400 USA sales (in USD) was reported in the US market. Here, (million $) +20.6% sales rose from USD 255.4 million to USD 300 +42.4% 307.9 million. 200 +61.0%

America also achieved a significant increase +24.2% in profitability. The gross profit margin 100 +24.0% climbed by 470 basis points, moving from 0 44.6% to 49.3%. The operating margin 2000 2001 2002 2003 2004 increased from 16.6% to 19.8%. Once again, the currency-adjusted orders volume increased 43.4%, (19.4% in Euro) to € 137.1 million. Orders on hand for the US market grew by 34.2% to USD 160 million.

22 Asia/Pacific sales were € 181 million or 31.6% higher than the previous year’s level of € 137.5 million, which corresponds to a currency-adjusted increase of 28.1%. Without the effects from the initial consolidation of PUMA Japan (April 1, 2003), sales rose by 200 Asia/Pacific Rim sales 11.8%. The Asia/Pacific region contributed +31.6% (million €)

11.8% to consolidated sales. Footwear 150 sales increased by 26.9%, Apparel by +190.2% 15%, and Accessories by as much as 100 70.3%. Next to Japan (Footwear and +4.7% Accessories), Australia, New Zealand and 50 +18.3% +1.2% the Pacific Islands also contributed to consolidated sales. Apparel sales in Japan 0 2000 2001 2002 2003 2004 and all other markets in this region are recorded under license sales.

The gross profit margin in this region improved by 3.7 percentage points, moving from 44.5% to 48.1%, and the operating margin rose from 17.7% to 21.9%. As of December 31, 2004, orders on hand were up 23% to € 82.8 million, showing a significant increase over the previous year’s level.

In Africa/Middle East consolidated sales increased significantly by 52.6%, moving from € 29.2 million to € 44.5 million. The region thus contributes 2.9% to consolidated sales. All product segments reported significant growth: Accessories grew by 114.6%, Apparel by 92.9% and Footwear by 41.5%. 50 Africa/Middle East sales +52.6% (million €) 40 The Africa/Middle East region also contributed to company profits with 30 +51.6% a significant increase in profitability. 20 +77.0% The gross profit margin climbed from +9.8% 27.4% to 34.4%, and the operating 10 +62.3% margin went up to 8.6% from 3.1% in 0 the previous year. As of December 2000 2001 2002 2003 2004 31, 2004, orders on hand improved by 65.5%, amounting to € 35.2 million.

23 Net Assets and Financial Postition

Consolidated Balance Sheet Structure 2004 2003 +/- % € million % € million %

Cash and cash equivalents 369.3 39.7% 190.6 27.2% 93.8% Inventories 201.1 21.6% 196.2 28.0% 2.5% Accounts receivables 189.6 20.4% 175.6 25.1% 8.0% Other short-term assets 0.3 0.0% 1.9 0.3% -85.6% Total current assets 760.3 81.8% 564.3 80.6% 34.7%

Deferred income taxes 51.6 5.6% 36.5 5.2% 41.6% Long-term assets 117.7 12.7% 99.4 14.2% 18.4%

Total assets 929.6 100.0% 700.1 100.0% 32.8%

Bank borrowings 12.9 1.4% 16.8 2.4% -23.0% Other liabilities 269.8 29.0% 204.8 29.3% 31.8% Total current liabilities 282.8 30.4% 221.6 31.7% 27.6%

Pension 21.2 2.3% 18.5 2.6% 14.2% Tax provision 33.7 3.6% 27.1 3.9% 24.5% Other provisions 53.8 5.8% 49.0 7.0% 9.8% Provisions 108.7 11.7% 94.6 13.5% 14.9%

Long-term interest bearing borrowings and minorities 2.4 0.3% 0.8 0.1% 196.0%

Shareholders’ equity 535.8 57.6% 383.0 54.7% 39.9%

Total liabilities and shareholders’ equity 929.6 100.0% 700.1 100.0% 32.8%

Working capital 148.4 155.7 -4.7% - in % of sales 9.7% 12.2%

24 Equity Ratio at 57.6%

Once again, the capital structure was successfully improved in 2004. Despite the 32.8% increase in the balance sheet total from € 700.1 million to € 929.6 million, the equity ratio was up from 54.7% to 57.6%. This development underscores the strong financial position 1,000 60% Balance sheet total/ of the PUMA Group. Equity ratio (million €) 800 55%

600 50%

400 45%

200 40% Equity ratio 0 35% Balance sheet total 2000 2001 2002 2003 2004

Further Improvement in Liquidity

As a result of the strongly improved cashflow, cash and cash As a result, net liquidity improved from € 173.8 million to equivalents almost doubled to € 369.3 million. Concurrently, € 356.4 million. bank debt was reduced from € 16.8 million to € 12.9 million.

Working Capital Again Improved

Working capital amounted to 9.7% of sales after 12.2% in the previous year. In absolute figures, the working capital declined by 4.7% at year-end, falling from € 155.7 million to € 148.4 million. This development, which surpassed expectations, is primarily due to 160 20% Working capital marginal inventory build-ups. A higher (million €) amount of merchandise was received in 120 15% December 2003, whereas the year-end 2004 indicates a shift to January 2005. The 80 10% calculation of working capital includes inventories, plus current receivables, less 40 5% current non-interest-bearing liabilities and in % of sales 0 provisions, to the extent attributable to the 0% Working capital 2000 2001 2002 2003 2004 operational area.

Inventories were up by 2.5% to € 201.1 million and receivables rose by 8% to € 189.6 million. This development confirms PUMA’s systematic and effective working capital management.

25 Cashflow

Cashflow 2004 2003 +/- % € million € million

Earnings before taxes on income 370.7 264.1 40.4% Non cash effected expenses and income 14.9 16.5 -10.0% Gross cashflow 385.6 280.6 37.4%

Change in current assets, net 0.5 -24.8 -102.1% Taxes and other interest payments -100.3 -90.8 - Net cash from operating activities 285.7 165.0 73.1%

Net cash used in investing activities -29.2 -57.6 -49.4%

Free cashflow 256.6 107.4 138.9% Free cashflow before acquisition cost 256.6 137.7 86.3% - in % of sales 16.8% 10.8% -

Net cash used in financing activities -70.8 -23.4 202.9%

Effect on exchange rates on cash -7.0 -7.0 -0.1% Change in cash and cash equivalents 178.8 77.0 132.2% Cash and cash equivalents at beginning of financial year 190.6 113.6 67.8%

Cash and cash equivalents at year-end 369.3 190.6 93.8%

26 Free Cashflow at New Record High

Due to the strong increase in pre-tax earnings, the gross cashflow increased by 37.4%, climbing from € 280.6 million to € 385.6 million.

400 Gross Cashflow Despite a marked increase in business volume, (million €) effective working capital management enabled 300 the release of € 0.5 million in net current assets in comparison with the € 24.8 million 200 requirement in 2003. Taxes, interest and other payments accounted for a total of 100 € 100.3 million (previous year € 90.8 million), which include subsequent tax payments for 0 2000 2001 2002 2003 2004 the previous year to the amount of € 22.4 million. The total cash provided by operations increased by 73.1% to € 285.7 million.

In all, investments totaled € 29.2 million (net) compared to € 57.6 million in the previous year. Gross capital expenditure amounted to € 43.1 million, of which € 22.2 million is attributable to the strategic expansion of retail operations. The free cashflow increased significantly from € 137.7 million (before acquisition costs) to € 256.6 million and from 10.8% to 16.8% of sales, thus 300 Free Cashflow exceeding the expectations of Management. (million €)

200

100

free cashflow before acquisition 0 free cashflow 2000 2001 2002 2003 2004

27 Value-Based Management

Only those who earn a rate of return above their cost of capital % value added will succeed in achieving a sustained increase in corporate value. In keeping with this principle, PUMA has implemented a system profitable growth Ø capital cost of value-based management.

loss-making growth

investment

Value Contribution

The measurement of return on capital is based on the cashflow The absolute value contribution corresponds to the difference, return on investment (”CFROI“), which, in simplified terms, is multiplied by the gross investment base, between the return on calculated as the gross cashflow divided by the gross investment capital (CROI) and cost of capital (WACC). A positive value base. The gross investment base is the total amount of available contribution is earned when the return on capital is greater than funds and assets before accumulated depreciation and the cost of capital. amortization.

Calculation of CFROI and Value Contribution million € 2004 2003 2002 2001 2000 Earnings after tax 259.0 179.9 84.7 40.2 17.6 + Depreciation and amortization 19.3 20.1 12.5 8.4 6.8 + Interest expenses 1.3 1.4 2.5 3.6 3.8 Gross cashflow 279.6 201.4 99.6 52.1 28.1 Monetary assets 559.9 367.8 250.0 156.0 152.9 - Non interest-bearing liabilities 287.7 253.0 225.9 154.4 125.8 Net liquidity 272.1 114.9 24.1 1.6 27.1 + Inventroy 201.1 196.2 167.9 144.5 95.0 + Fixed assets at prime cost 135.8 107.6 88.1 77.0 51.9 + Intangible assets at prime cost 46.1 44.6 29.2 28.2 11.0 Gross investment basis 655.1 463.3 309.3 251.3 185.0 Cashflow return on investment 42.7% 43.5% 32.2% 20.7% 15.2% (CFROI) CFROI - WACC 33.9% 35.9% 23.2% 12.1% 7.3% Absolute value contribution 222.3 166.3 71.7 30.4 13.5

28 Cost of Capital

Cost of capital represents the minimum rate of return that must be earned by invested capital in order to create value. The weighted average cost of capital (WACC) is calculated in order to simulate an adequate market rate of return. The cost of capital is calculated as the weighted average of the cost of equity and borrowed capital.

Calculation of Weighted Average Capital Costs (WACC) 2004 2003 2002 2001 2000

Riskfree interest rate 4.3% 4.3% 4.3% 4.9% 4.9% Market premium 5.0% 5.0% 5.0% 5.0% 5.0% Beta (M-DAX, 24 month) 0.9 0.7 1.0 0.9 0.9 Cost of stockholders’ equity 8.8% 7.6% 9.3% 9.4% 9.4%

Riskfree interest rate 4.3% 4.3% 4.3% 4.9% 4.9% Credit risk premium 3.0% 3.0% 3.0% 3.0% 3.0% Tax shield 30.5% 31.9% 32.0% 30.1% 30.1% Cost of liabilities after tax 5.0% 4.9% 5.0% 5.6% 5.6%

Calculation Market capitalization 3,249 2,248 1,030 524 195 Share of equity 100.0% 99.0% 93.7% 79.5% 61.3% Calculated liabilities 0 22 69 135 123 Share of liabilities 0.0% 1.0% 6.3% 20.4% 38.5% WACC after tax 8.7% 7.6% 9.0% 8.6% 7.9%

Prior years were adjusted according to the new methodology

Continued Value Increase

The sustained positive development is also evidenced in PUMA’s value increase.

As a result of the successful year 2004, 250 Absolute value gross cashflow (after tax) rose from contribution (million €) € 201.4 million to € 279.6 million, an 200 increase of 38.8%. 150

Gross investment increased 41.4%, from 100

€ 463.3 million to € 655.1 million, while 50 net liquidity rose from € 114.9 million to € 272.1 million, or by 136.9%. 0 2000 2001 2002 2003 2004

The cashflow return on investment (CFROI) in 2004 was 42.7% compared to 43.5% in the previous year. In consideration of the cost of capital, the absolute value contribution, i.e., the economic value added, rose to € 222.3 million (previous year: € 166.3 million).

29 Product Development and Design

PUMA’s Product Philosophy

PUMA’s independent and unique product philosophy enables it to Yasuhiro Mihara, Philippe Starck, Neil Barrett, Jil Sander and adapt and respond to new challenges. Through the successful Christy Turlington, who are primarily engaged in developing interplay of creative influences from the world of sports, lifestyle product concepts in the higher-priced segment. The main and fashion, PUMA inspires a broad range of consumers in the challenge for our designers and product developers is to sports arena, at the club, or on the street. Innovation, design and successfully track trends and continuously create unique product product development go hand in hand. concepts.

Product development centers are located in Herzogenaurach /Germany, Boston/USA, Taiwan and, since mid-2004, London/UK. The PUMA team is supplemented by external know-how through cooperative relationships with well-known designers such as

Higher Investments in Product Development and Design

Product development and design are of growing importance for ensuring PUMA’s sustained success and profitability and for satisfying consumer requirements on a permanent basis.

Investments for product development and 40 Expenses for product +23.3% developement and design design increased faster than sales at 23.3%, (million €) rising from € 29.9 million to € 36.9 million. 30 +23.4%

The team was expanded. At the end of 2004, +22.0% +9.3% the product development and design area had 20 +19.6% 344 employees, a 20.7% increase over the previous year’s level of 258 employees. 10 2000 2001 2002 2003 2004

30 Sourcing

Sourcing Organization

PUMA has a wholly owned subsidiary that is responsible for In addition to production know-how and long-term partnerships, outsourced production and sourcing. The PUMA sourcing the development of the Euro/US Dollar exchange rate also organization has offices in Hong Kong, Herzogenaurach and influences the decisions to relocate further sections of sourcing Boston, which are responsible for the Asian, European and from the Euro Zone to Asia. American sourcing markets respectively.

Asia as Largest Sourcing Market

Asia is PUMA’s largest sourcing market, followed by Europe and America. Footwear is procured almost exclusively in Asia. In Apparel, there was further relocation from Europe to Asia. Overall, the share of sourcing in Asia rose from 74% to 81%. 100% Sourcing markets / units

75%

50%

25%

2003 0% 2004 Far East/Asia Europe America

Ethical and Social Standards

PUMA acknowledges the principle of Sustained Development; Since January 2004, PUMA has been a "graduating member" of this principle is aimed at the optimization and integration of the Fair Labor Association (FLA), an international non-profit economic, ecological, and social matters. Accordingly, all of organization engaged in monitoring compliance with the FLA PUMA’s dealings are oriented towards meeting the demands of Code of Conduct through independent external audits. PUMA has today’s generation without impairing the opportunities of the also adapted to this code. The publication of audit results also generations of tomorrow. serves to further increase the transparency of information vis à vis the public. Realization of the sustainability idea is supported by a code of conduct which is binding for management, employees and PUMA issues an annual sustainability report in accordance with producers. PUMA’s S.A.F.E. Team (Social Accountability and the guidelines of the “Global Reporting Initiative (GRI)”, which is Fundamental Environmental Standards) provides the necessary available on the Internet under www.about.puma.com. training and monitors compliance with the integrity code at international level.

31 Employees

Rising Employee Numbers

As a result of positive business development, PUMA was able to create additional jobs. On an annual average, it maintained a workforce of 3,475 employees, compared to 2,826 in the previous year. This corresponds to an increase of +23%. In the same period, personnel 4,000 Employees development expenses rose by 25.8%, from € 126.6 million 2000-2004 to € 157.5 million. The average per capital expense increased from € 45 thousand to 3,000 € 46 thousand.

2,000 Largely due to further expansion of the company’s retail operations, sales per employees (year-end) 1,000 employees (annual average) employee in 2004 declined from € 450.8 thou- 2000 2001 2002 2003 2004 sand to € 440 thousand. As of December 31, 2004, PUMA had 3,910 employees worldwide; this represents an increase in the number of personnel by 721 or 22.6% in comparison with the previous year. New personnel were recruited in the sales area in particular, due to the aforementioned retail expansion. In all, sales staff increased by 563 to 2,080 employees. 500 Sales per employees (on average) (thousand €) 400 The marketing area was built up by 11.8% to a current 152 employees and product 300 management/product development & design 200 by 59 to 344 employees. Sourcing/logistics increased by 21 to 802 employees. In the 100 central units, there were 62 new hirings which brought the number of staff to 532. 0 2000 2001 2002 2003 2004

Sales Employees by function (year-end)

Marketing

Productmanagement/ development

Central units

2004 Sourcing/logistic 2003 0 500 1,000 1,500 2,000 2,500

32 Corporate Culture

PUMA promotes a corporate culture in which processes are used react flexibly to changes on the market and thus continue to only as means to an end, as traditional conceptual approaches are follow its guiding corporate mission of being ”the first truly combined with the unconventional and work is meant to be fun. virtual sporting goods company”. Moreover, the internal and external networking of employees and customers is effectively PUMA strives to further develop the company through the expanded through the use of state-of-the-art technology, thus advancement of shared values that are in concert with the brand creating the foundation for further growth. personality. These shared values can be summed up in four concepts: Passion, Openness, Self-belief and Entrepreneurship. Our goal is to recognize and promote the performance and PUMA supports and promotes communication beyond cultural achievement potential of each employee. To this end, periodic borders and it creates the preconditions which foster creativity, performance appraisal meetings are held between supervisors understanding, social competence and flexibility. With the help of and employees for evaluating work performance with discussion a decentralized system of corporate management, PUMA can and agreement on the goals for the future.

Management Incentives and Bonus Programs

In 1996, PUMA introduced a Management Incentive Plan for the includes bonus agreements as well as share-based payment Board of Management and the Management of PUMA AG and its schemes with long-term incentive effects as a variable subsidiaries. The current remuneration system of Management remuneration component.

33 Risk Management

PUMA’s worldwide activities are exposed to extensive global and Moreover, strategic planning and special projects such as margin local risks, arising from internal and external factors which are control and process optimization are used as cross-departmental carefully monitored within the framework of a risk management tools. Process- or risk-specific systems, particularly with respect system. To this end, the risk volume is identified and quantified, to supplier reviews, hedging of currency risks, and a group-wide the probability of occurrence is assessed, and countermeasures controlling and reporting system are additional tools used in are formulated to achieve the envisaged corporate targets. PUMA’s risk management process.

The guidelines and organization of the risk management The risk areas to be reported on, as well as any new findings system ensure a methodological and systematic approach within in the risk portfolio, are defined by RMC and evaluated in the Group. The direct responsibility for risk is transferred to accordance with a guideline. Any changes are promptly operational employees who report on any detected risks in a communicated to the Board of Management. “bottom-up” procedure. This ensures that risks can be detected early and reported to the ”Risk Management Committee“ (RMC). The risk management reports on significant changes in the risk portfolio both through periodic and ad-hoc reporting.

Risk Areas

General Economic Risks The overall economic development may have a direct influence sporting goods industry and the business development of PUMA. on consumer behavior. A significant slowdown can lead to a PUMA counters this risk through geographic diversification and a decline in consumer spending with adverse effects on the well-balanced portfolio.

Brand Image The success of a global company is largely dependent on its which conducts audits of all manufacturers of PUMA products brand strength and its ability to respond to the desires and worldwide in accordance with guidelines that are even more expectations of consumers. In addition, public expectations stringent than legally required. regarding environmental and sociopolitical standards are increasingly gaining in importance and any arising problems can The PUMA logo and the related form stripe are protected impact the brand. PUMA approaches these risks with a carefully trademarks of the PUMA brand. Along with increasing brand designed long-term marketing strategy that includes market awareness and desirability, the number of product imitations and research activities as well as trend studies on design, image pirated products has grown. This has potentially negative effects and price setting. To ensure compliance with environmental on the brand image. Therefore, PUMA is increasingly mobilizing and sociopolitical standards, PUMA’s S.A.F.E team (Social, internal resources for intense surveillance and legal prosecution Accountability, Fundamental, Environmental) has established a of such cases. All detected imitations are taken off the market corporate process and internal control management system, and are destroyed.

Dynamic Market Environment A dynamic market and competitive environment requires that competition, characteristic design and the high recognition new and innovative concepts are continuously developed and value of the PUMA brand are significant factors in creating a market trends quickly grasped and flexibly implemented. competitive advantage. Furthermore, if market shifts are not recognized and With its successful global positioning and accompanying implemented early, the consumer demand for PUMA products strengthening of the brand through internationally oriented may change significantly. In order to transform the company’s marketing concepts, PUMA aims to be an industry leader. own creative ideas into new products in line with market Moreover, the existing risk is reduced through effective product requirements, the company invests heavily in design and lifecycle management, targeted merchandising of PUMA products product development. Deliberate differentiation from and PUMA’s own retail activities.

34 Personnel Risks To a significant extent, the success of the PUMA Group is due to attractive remuneration systems with to the goal of building the dedicated commitment and performance of its employees. To up, developing, and motivating top talent to remain with the ensure lasting success, the company has developed external and company on a long-term basis. internal training measures, employee participation programs, and

Sourcing Risks Most suppliers’ production facilities are in the industrializing instability. Risks can also arise as a result of an over-dependency countries of Asia. Business activities with these countries create on individual suppliers. For the avoidance and containment of diverse risks for the PUMA Group. For example, risks may arise such sourcing risks, PUMA has developed very good relationships through exchange rate fluctuations or changes in customs levies with a number of manufacturers in different countries and and duties, trade restrictions, natural disasters and political sourcing regions.

Financial Risks Financial risks may arise for PUMA primarily through currency raised through sales in the US$ region. PUMA approaches this risk effects. The majority of PUMA products are sourced in Asia in in accordance with an internal guideline through the use of US$. Parts of the necessary US$ currency, however, can only be primary and derivative financial instruments (hedging).

Product PUMA products must satisfy the functional, aesthetic and according to technical, material, and design specifications. As a high-quality expectations of buyers. Extensive laboratory tests risk prevention measure, PUMA has established a global and collaboration with PUMA athletes on product design and sourcing organization responsible for all requirements of product development ensure that the products satisfy the highest quality manufacturing. requirements. To this end, the external manufacturers work

Retail Operations The international expansion of the company’s retail operations increase the share of fixed costs. In periods of declining sales, ensures consistent presentation of the product lines and allows these fixed costs would burden profitability. PUMA approaches the company to capture a higher gross profit margin. However, these risks through careful selection of retail locations, the extension of the value chain involves investment risks. An recruitment of staff with extensive experience in the retail increase in retail shops, for example, may be associated with business, daily sales reporting, and extensive controlling. long-term rental commitments and investments which could

Organizational Challenges The virtual organizational structure built up over the years drives caused by the growth of the Group. Through strategic planning, global orientation and ongoing decentralization. However, it is continuous optimization of business processes and investments associated with increased coordination requirements for coping in information technology, PUMA can continue to grow with technical, logistical and personnel challenges. An added organizationally while tapping into new potential for efficiency factor is the growing complexity within the organization structure and international communications.

Summary PUMA’s risk management enables it to fulfill the legal of the risk situation the risks are limited and confinable and do requirements concerning control and transparency in company not represent a hazard to the going concern of the PUMA Group. operations. Management believes that in the overall assessment

35 Orders Position

Order Volume Tops the € 800 Million Mark for the First Time

Orders on hand as of December 31, 2004 reached a new high, topping the € 800 million mark for the first time. This was the ninth consecutive year of orders increase. Currency-adjusted orders were up 17.7% from the previous year. The corresponding increase in Euro was Orders on hand by 13.9%, bringing orders from € 722 million to segment € 822.6 million. The backlogs mainly included Footwear (million €) orders for shipments for the first and second quarter of 2005. Apparel

2004 In the segments, Footwear grew orders by 2003 2002 Accessories 14.7% (18.7% currency-adjusted) to € 580.1 2001 2000 million. Apparel was at € 196.4 million, rising 0 100 200 300 400 500 600 by 7.8% (10.6% currency-adjusted). Orders for Accessories increased 36.2% (40.3% currency-adjusted) to € 46.1 million.

The regions developed as follows: Europe was up 9.4% to € 567.4 million, and orders in America rose by currency-adjusted 43.4% or, in euro, by 19.4% to € 137.2 million. Asia grew by 23% to € 82.8 million. Africa and the Middle East rose by 65.5% to € 35.2 million. Orders on hand by region Europe (million €)

America

Asia/ 2004 Pacific Rim 2003 2002 Africa/ Middle East 2001 2000 0 100 200 300 400 500 600

36 Outlook

Cautious Expansion of the World Economy in 2005

It is expected that macroeconomic production in the industrial A year without any large sports events and a challenging market countries will expand moderately in 2005, albeit not with the environment that has already presented difficulties for retailers same acceleration as before. If monetary conditions and earning cannot realistically be expected to bring a ground-breaking perspectives remain advantageous, increased investment upswing in the sporting goods industry. However, the soccer spending is to be expected. Overall, the driving economic World Cup in 2006 is likely to begin impacting the market at the indicators appear to be stable and an economic slump is not in end of 2005. sight, despite the oil price increases and weaker growth stimuli from monetary and fiscal policy. Despite the expectations of cautious expansion of the world economy, orders for the first half of 2005 give rise to a positive According to the expert opinion issued by the “Kiel Institute for outlook. World Economics”, the economic expansion in the USA could lose further momentum due to a tightening of monetary policy and the loss of tax incentives. Japan should be able to compensate for the lower increase in demand from China through stabilizing its domestic economy. Thus, the Japanese economy is expected to grow less than in 2004 but still faster than the medium-term trend. The European Union, too, should see a slackening of economic expansion in the coming years, but production in the Euro Zone could rise with a small change in tempo. Inflation should remain moderate, and the unemployment rate could fall marginally.

Since global economic development can have a marked effect on general consumer behavior, the dampened prognoses for the world economy could also make themselves felt in the sporting goods sector. The current consumer trend in the USA toward expensive, performance-based products could be slowed by less consumer spending due to higher oil prices.

37 Renewed Sales Growth Expected for 2005

Current order development indicates strong growth in the America and Asia regions whereas growth will probably slow down in Europe due to the generally difficult market environment, in particular in the large sporting goods markets. In all, consolidated sales are 1,800 Development and expected to show high single digit growth outlook (million €) (currency-adjusted.) 1,400

The US Dollar requirement is hedged against 1,000 currency fluctuations up to and including 2006.

Due to the available hedging rates for 2005, 600 the gross profit margin should move in the Sales 50% to 52% range. Selling, general and 200 administrative expenses will yield a higher cost Gross profit EBT ratio due to the further expansion of retail 0 operations and associated cost increases, as -200 well as additional personnel expenses owing to 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 the fact that share-based remuneration is stated at fair value for the first time for FY2005. Total costs should not exceed 31% of sales, however. The license business should also continue to improve, particularly in Asia, with an increase in royalty and commission income. An operating margin of over 20% is expected, placing PUMA in the upper range within the sporting goods industry. The tax rate is expected to range between 29% and 30%.

Management is optimistic that further growth in sales can be achieved in 2005 and that earnings will see another record high despite the moderate economic starting position in some markets. As a result, the original goals set for Phase III of corporate planning (2002-2006) should be far exceeded in 2005. Therefore, PUMA is planning to finalize this phase of development one year ahead of schedule.

Herzogenaurach, January 24, 2005

The Board of Management

Zeitz Gänsler Heyd

38 PUMA Share

Stock price breaks the € 200 barrier

The stock markets in 2004 were overshadowed by the level and the average trading volume rose to 141.753 shares per international political turmoil in the Near East, the development day, or by 13.2%. of oil prices, and the associated ripple effect on the world economy. In view of these influencing factors, stock markets The price of PUMA’s share continued to climb in 2004 line with the moved rather cautiously. The DAX managed to grow by 7%, while positive value development in recent years. In the course of the MDAX climbed to 20%. twelve months, the value of the share rose by 44.5%, closing at € 202.30 at December 31, 2004 after € 140.00 in the previous The appeal of the PUMA share reflects the desirability of the year. The market capitalization was at € 3.25 billion, compared to PUMA brand. In addition, the PUMA share is 100% publicly held. € 2.25 billion in the previous year. Once again, the trading volume was up from the previous year’s

Key data per PUMA share in Euro 2004 2003 2002 2001 2000

End of year price 202.30 140.00 65.03 34.05 12.70 Hightest price listed 219.54 141.00 73.34 34.05 21.00 Lowest price listed 140.15 59.15 33.00 12.45 12.50 Average daily trading volume (amount) 141.753 125.202 91.532 46.842 24.963 Earnings per share 16.06 11.26 5.44 2.58 1.14 Gross cashflow per share 24.06 17.61 8.65 4.53 2.20 Free cashflow per share 16.01 6.74 6.41 1.46 0.59 Shareholders’ equity per share 58.01 24.04 15.92 11.48 8.53

The development of the PUMA share during the year was once again steady, moving in the range between € 140.15 and € 219.54 after € 59.15 and € 141.00 the year before. The share reached its lowest point for the year on January 14, 2004 at € 140.54. The high for the 230 year was realized on October 4, 2004. PUMA Share Performance 220

210 As in previous years, PUMA maintained its top 200 position in the DAX values (DAX and MDAX) 190 through its superior performance. With a value increase of 44.5%, it again outpaced the DAX, 180 while also topping value growth rates among 170 the large sporting goods companies. 160 150

140

130

120 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

39 160 800,000 Share Performance and Transaction Volume - Rebased 140 700,000

120 600,000

100 500,000

80 400,000

60 300,000

40 200,000

PUMA 20 100,000 MDAX

0 0 Trading volume Jan Feb Mrz Apr Mai Jun Jul Aug Sep Okt Nov Dez

160 Index and Competitor Share Development - 150 Rebased

140

130

120

110

100 PUMA

90 MDAX

80 DAX NIKE 70 REEBOK 60 ADIDAS Jan Feb Mrz Apr Mai Jun Jul Aug Sep Okt Nov Dez

The PUMA share has been traded on the official markets of the addition, the ADR Program (American Depository Receipts) was Frankfurt and Munich stock exchanges since 1986. It is listed in established for the US stock market in 1996. The ADR’s are the Prime Standard Segment and belongs to the Mid-Cap-Index traded over the counter in US Dollars under ticker symbol MDAX of the German Stock Exchange (Deutsche Börse). In ”PMMAY”.

40 Consolidated Financial Statements - IFRS - Consolidated Balance Sheet 60 Consolidated Income Statement 61 Consolidated Cashflow Statement 62 Changes in Equity 63 Appendix to the Financial Statements 64 Consolidated Financial Statements 65 Auditor’s Report 91

59 Consolidated Balance Sheet

Dec. 31, 2004 Dec. 31, 2003 Notes € million € million

ASSETS

Cash and cash equivalents 3 369.3 190.6 Inventories 4 201.1 196.2 Trade receivables and other receivables 5 189.6 175.6 Other short-term financial assets 6 0.3 1.9 Total current assets 760.3 564.3

Deferred income taxes 7 51.6 36.5 Property, plant and equipment 8 84.7 66.5 Goodwill 9 20.0 22.3 Other intangible assets 10 7.2 5.9 Other long-term financial assets 11 5.3 4.1 Investment in associated companies 12 0.6 0.6 Total assets 929.6 700.1

LIABILITIES AND EQUITY

Financial liabilities 13 12.9 16.8 Trade payables 14 136.9 132.6 Other liabilities 14 123.3 69.0 Total current liabilities 273.1 218.5

Pension 15 21.2 18.5 Tax provisions 16 33.7 27.1 Other provisions 17 53.8 49.0 Total provisions 108.7 94.6

Long-term interest bearing liabilities 13 0.0 0.0 Deferred income taxes 7 9.6 3.2 Minority interest 18 2.4 0.8

Subscribed capital PUMA AG 42.7 41.6 Group reserves 178.8 84.0 Accumulated profits 414.6 278.5 Treasury stock -100.2 -20.9 Shareholders’ equity 19 535.8 383.0 Total liabilities and shareholders’ equity 929.6 700.1

60 Consolidated Income Statement (Nature of Expense Method)

2004 2003 Notes € million € million

Net sales 27 1,530.3 1,274.0 Cost of sales 27 -736.4 -654.0 Gross profit 27 794.0 620.0

Royalty and commission income 43.7 40.3 837.7 660.4

Personnel expenses 21 -157.5 -126.6 Advertising and selling costs 22 -186.5 -158.7 General and administrative expenses 22 -171.4 -145.9 Other operating income 22 62.0 54.1 Total selling, general and administrative expenses, net 22 -453.4 -377.1 Depreciation -19.3 -20.1 -472.7 -397.2

Profit from operations 27 365.0 263.2 Financial result 23 5.7 0.9 Earnings before taxes 370.7 264.1

Income tax 24 -111.7 -84.2 Net earnings before minority interest 259.0 179.9 Minority interest 18 -1.7 -0.6 Net earnings 257.3 179.3 Net earnings per share (€) 25 16.06 11.26 Net earnings per share (€) - diluted 25 15.74 10.90 Weighted average shares outstanding 25 16.025 15.932 Weighted average shares outstanding, diluted 25 16.350 16.449

61 Consolidated Cashflow Statement

2004 2003 Notes € million € million

Operating activities Profit before tax 370.7 264.1 Adjustment for: Depreciation 8,9,10 19.3 20.1 Non-realized currency gains/losses, net 3.4 -3.5 Interest received 23 -7.0 -2.3 Interest paid 23 1.3 1.4 Income from the sale of fixed assets -4.7 0.2 Additions to pension accruals 15 2.6 0.6

Gross cashflow 28 385.6 280.6

Increase in receivables and other current assets -18.3 -40.7 Increase in inventories -8.4 -17.9 Increase in trade payables and other current liabilities 27.2 33.8 Cash provided by operations 386.1 255.8 Interest paid -1.3 -1.4 Income taxes paid -99.0 -89.3 One time expenses paid 0.0 0.0

Net cash from operating activities 28 285.7 165.0

Cash from investment activities Payment for goodwill (previous year: purchase of participations) 0.0 -30.3 Purchase of property and equipment 8,9,10 -43.1 -27.0 Proceeds from sale of property and equipment 8.2 1.2 Increase/decrease in other long-term assets -1.3 -3.7 Interest received 7.0 2.2

Net cash used in investing activities 28 -29.2 -57.6

Cash from financing activities Payments made regarding long-term liabilities, net 0.3 0.0 Payments received regarding short-term bank borrowing, net 13 -3.7 -3.0 Payments made regarding convertible bonds, net 20 0.0 0.0 Dividend payments 19 -11.2 -8.7 Capital increase 20 23.2 9.5 Purchase of treasury stock 19 -79.2 -20.9 Other changes -0.1 -0.2

Net cash used in financing activities 28 -70.8 -23.4

Effect of exchange rates on cash -7.0 -7.0

Increase in cash and cash equivalents 178.8 77.0 Cash and cash equivalents at beginning of financial year 190.6 113.6

Cash and cash equivalents at year-end 3,28 369.3 190.6

62 Changes in Equity

Subscribed Group reserves Consolidated Treasury TOTAL capital Capital Revenue Difference Cashflow profit/net stock reserve reserves from hedges income for PUMA AG PUMA AG currency the year in € million conversion

Dec. 31, 2002 40.6 41.9 40.9 2.6 -0.2 126.5 252.2

Dividend payment -8.7 -8.7

Transfer to profit reserves 18.6 -18.6

Currency changes -17.8 -17.8

Release to the income statement -1.1 -1.1

Market value for cashflow hedges -9.5 -9.5

Capital increase 1.0 8.5 9.5

Consolidated profit 179.3 179.3

Purchase of treasury stock -20.9 -20.9

Dec. 31, 2003 41.6 50.4 59.5 -15.2 -10.7 278.5 -20.9 383.0

Dividend payment -11.2 -11.2

Transfer to profit reserves 30.8 -30.8

Currency changes -17.8 -17.8

Release to the income statement 10.3 10.3

Market value for cashflow hedges -29.8 -29.8

Capital increse 1.1 22.1 23.2

Consolidated profit 257.3 257.3

Purchase of treasury stock 79.2 -79.2 -79.2 -79.2

Dec. 31, 2004 42.7 72.5 169.5 -33.0 -30.3 414.6 -100.2 535.8

63 Appendix to the Financial Statements

Purchase costs Balance Currency Additions/ Disposals Balance Jan. 1, 2004 changes retransfers Dec. 31,2004 and other € million changes € million PROPERTY, PLANT AND EQUIPMENT

Land, land rights and buildings including buildings on third party land 28.2 -0.2 14.9 2.8 40.1 Technical equipment and machines 3.2 0.1 0.6 1.9 1.9 Other equipment, factory and office equipment 67.2 -2.7 28.8 3.1 90.2 Payments on account and assets under construction 9.1 -0.2 -4.4 0.9 3.6 107.6 -3.0 39.8 8.7 135.8

GOODWILL 30.7 -0.8 0.0 0.5 29.3

OTHER INTANGIBLE FIXED ASSETS

Concessions, industrial and similar rights and assets and licenses under such rights and assets 13.9 -0.2 3.3 0.2 16.8 13.9 -0.2 3.3 0.2 16.8

OTHER LONG-TERM ASSETS

Other loans 1.7 0.0 0.5 1.3 0.9 Other assets 2.4 -0.2 2.2 0.0 4.4 Shares in associated companies 0.6 0.0 0.0 0.0 0.6 4.7 0.2 2.6 1.3 5.9

Accumulated depreciation Book values Balance Currency Additions/ Disposals Balance Balance Balance Jan.1,2004 changes retransfers Dec.31,2004 Dec.31,2004 Dec.31,2003 and other € million changes € million € million € million PROPERTY, PLANT AND EQUIPMENT

Land, land rights and buildings including buildings on third party land 8.0 0.1 1.6 1.0 8.7 31.4 20.1 Technical equipment and machines 2.2 0.1 0.4 1.7 1.0 0.9 0.9 Other equipment, factory and office equipment 30.9 -0.6 13.8 2.6 41.4 48.8 36.3 Payments on account and assets under construction 0.0 0.0 0.0 0.0 0.0 3.6 9.1 41.2 -0.5 15.7 5.3 51.1 84.7 66.5

GOODWILL 8.4 -0.2 1.7 0.5 9.4 20.0 22.3

OTHER INTANGIBLE FIXED ASSETS

Concessions, industrial and similar rights and assets and licenses under such rights and assets 8.0 -0.1 1.9 0.2 9.5 7.2 5.9 8.0 -0.1 1.9 0.2 9.5 7.2 5.9

OTHER LONG-TERM ASSETS

Other loans 0.0 0.0 0.0 0.0 0.0 0.9 1.7 Other assets 0.0 0.0 0.0 0.0 0.0 4.4 2.4 Shares in associated companies 0.0 0.0 0.0 0.0 0.0 0.6 0.6 0.0 0.0 0.0 0.0 0.0 5.9 4.7

64 Consolidated Financial Statements

1. General Remarks

Under the “PUMA” brand name, PUMA Aktiengesellschaft Rudolf Accounting Standards Board (IASB). All IASB standards and Dassler Sport (hereinafter “PUMA AG”) and its subsidiaries are interpretations to be complied with as from January 1, 2004 have engaged in the development and sales of a broad range of sport been applied. The consolidated financial statements are deemed and sportlifestyle articles including footwear, apparel and as having an exemptive effect in accordance with Section 292a accessories. The company is a joint stock company under German (2) HGB. law and has its registered head office in Herzogenaurach, Federal Republic of Germany; its responsible registration court is in Fürth The consolidated financial statements are prepared in Euro (Bavaria, Germany). currency (EUR or €); they were drawn up in compliance with EU Directive 83/349 on the basis of the Guideline pursuant to DRS 1 The consolidated financial statements of PUMA AG and its of the German Accounting Standards Committee. Preparation in subsidiaries (hereinafter the “Company” or “PUMA”), were million Euros may lead to rounding-off differences since the prepared in accordance with the “International Financial calculation of individual items is based on figures presented in Reporting Standards (IFRS)” issued by the International thousands.

2. Significant Consolidation, Accounting and Valuation Principles

Consolidation Principles The consolidated financial statements were prepared on the basis fluctuations are included in consolidated earnings to the extent of uniform accounting and valuation methods in accordance with that this occurred during the reporting period. If the differences IFRS as of the reporting date of the parent company’s annual are long-term in nature, their inclusion is neutral in its effect on financial statements on December 31, 2004. profits.

Capital consolidation was based on the book value method, i.e., Within the course of income consolidation, inter-company sales the capital was consolidated by offsetting acquisition costs and all significant intra-group income were offset against the against the fair value of the prorated equity attributable to the expenses attributable to them. Interim profits not yet realized parent company as of the acquisition date. Associated companies within the group are eliminated. are valued at equity.

Intra-group receivables and liabilities have been offset against one another. Any differences arising from exchange rate

65 Consolidated Group and Associated Companies In addition to PUMA AG, all subsidiaries in which PUMA AG Development in the number of group companies during the holds a majority interest either directly or indirectly are fully financial year is as follows: consolidated. Associated companies are recognized at equity.

Dec. 31, 2003 46 Newly founded companies 3 Dec. 31, 2004 49

“PUMA Schweiz” was renamed as “Mount PUMA AG” in financial In December 2004, “PUMA Speedcat SAS” was founded in year 2004; this company then established “PUMA Schweiz AG” France; the company acquired the shares in PUMA France SAS and “PRETAG Schweiz” which led to expansion of the from PUMA Sprint GmbH. consolidated group. Through hiving off, Mount PUMA AG outsourced its wholesale business to “PUMA Schweiz AG” and its The extension or reorganization of the corporate structure has no existing retail business to “PRETAG Schweiz”. Moreover, as from effects on net assets, financial position and results of operations. 2005, PRETAG assumes responsibility for the European retail business with the aim of centralizing and further expanding retail Tretorn Vertrieb GmbH made use of the exemption provision operations. defined in Section 264 (3) HGB and will not prepare separate annual financial statements under commercial law provisions. In August 2004, the companies: “PUMA UK, Ltd.”, “PUMA France SAS”, “PUMA Italia S.r.L”, “PUMA Nordic AB”, “PUMA Australia Pty. Ltd.” and “PUMA Japan KK” were transferred from “PUMA AG” to “PUMA Sprint GmbH” retroactively as of December 31, 2003.

66 Broken down by regions, the consolidated companies were as follows:

No. Companies Shareholder/No. Share in capital Western Europe 1. PUMA AG Rudolf Dassler Sport, Herzogenaurach/Germany Free float of stock 100% - parent company - 2. PUMA UNITED KINGDOM LTD, Leatherhead/Great Britain 24 100% 3. PUMA FRANCE SAS, Illkirch/France 27 100% 4. PUMA Portugal Artigos Desportivos Lda., Prior Velho/Portugal 3 51% 5. Mount PUMA AG (Schweiz), Lengnau bei Biel/Switzerland 1 100% 6. PRETAG (Schweiz), Lengnau bei Biel/Switzerland 5 100% 7. PUMA (Schweiz) AG, Lengnau bei Biel/Switzerland 5 100% 8. Austria PUMA Dassler Ges. m.b.H., Salzburg/Austria 1 100% 9. PUMA Benelux B.V., Leusden/The Netherlands 1 100% 10. PUMA Italia s.r.l., Milan/Italy 24 100% 11. Tretorn Vertrieb GmbH, Herzogenaurach/Germany 1 100% 12. Tretorn AB, Helsingborg/Sweden 1 100% 13. PUMA Nordic AB, Helsingborg/Sweden 24 100% 14. PUMA Norway AS, Oslo/Norway 13 100% 15. PUMA Finland Oy, Finland 13 100% 16. PUMA Denmark A/S, Skanderborg/Denmark 13 100% 17. Tretorn Sweden AB, Helsingborg/Sweden 12 100% 18. Tretorn Finland Oy, Helsinki/Finland 12 100% 19. Tretorn Sport Ltd., Laoise/Ireland 12 100% 20. Tretorn Tennis Ltd., Laoise/Ireland (non active) 12 100% 21. Tretorn Sport Sales Ltd., Laoise/Ireland 12 100% 22. Tretorn R&D Ltd., Laoise/Ireland (non active) 19 100% 23. Hunt Sport AB, Helsingborg/Sweden (non active) 12 100% 24. PUMA Sprint GmbH/Germany 1 100% 25. PUMA Avanti GmbH/Germany 24 100% 26. PUMA Mostro GmbH/Germany 25 100% 27. PUMA Speedcat SAS, Illkirch/France 24 100%

Eastern Europe 28. PUMA Polska Spolka z.o.o., Warsaw/Poland 8 100% 29. PUMA–RUS GmbH, Moscow/Russia 8 89% 1 11% 30. PUMA Hungary Kft., Budapest/Hungary 8 100% 31. Czech Puma Dassler s.r.o., Prague/Czech Republic 8 100%

Asia/Pacific Rim 32. PUMA Australia Pty. Ltd., Moorabbin/Australia 24 100% 33. - White Diamond Australia Pty. Ltd., Moorabbin/Australia (non active) 32 100% 34. - White Diamond Properties, Moorabbin/Australia (non active) 32 100% 35. PUMA New Zealand LTD, Auckland/New Zealand 32 100% 36. World Cat Ltd., Kowloon/Hong Kong 1 100% 37. - World Cat (S) Pte Ltd./Singapur 36 100% 38. - World Cat Trading Co.Ltd Taichung/Taiwan 36 100% 39. Development Services Ltd., Kowloon/Hong Kong 36 100% 40. PUMA FAR EAST Ltd., Kowloon/Hong Kong 1 100% 41. PUMA JAPAN KK, Tokyo/Japan 24 100%

America 42. PUMA Suede, Inc., Westford/USA 25 100% 43. PUMA North America, Inc., Westford/USA 26 32% 42 68% 44. PUMA Canada, Inc. Ontario/Canada (non active) 43 100% 45. PUMA CHILE S.A. Santiago/Chile 1 51% 46. PUMA Sports Ltda., Sao Paulo/Brazil 43 100%

Africa/Middle East 47. PUMA Sports S.A., Cape Town/South Africa 8 100% 48. PUMA SPORTS DISTRIBUTORS (PTY) LIMITED, Cape Town/South Africa 47 71%

Associated companies 49. Sportlifestyle Majazacilik Sanayi ve Ticaret A.S., Istanbul/Turkey 8 35%

67 Currency Translation As a general rule, foreign currency monetary items are disclosed income were translated at annual average rates. Differences in the individual financial statements of consolidated companies from net assets currency translation through changed exchange at the rates valid at the balance sheet date. The resulting rates in comparison with the previous year were shown directly currency gains and losses are immediately credited or charged to in equity. Goodwill resulting from the acquisition of foreign operations. subsidiaries within the scope of initial consolidation were translated in Euro and extrapolated accordingly. The assets and liabilities of foreign subsidiaries which do not have the Euro as their functional currency were translated into Euro at the middle rates valid at the balance sheet date. Expenses and

Derivative Financial Instruments/Hedge Accounting Derivate financial instruments are initially recorded in the balance effective are disclosed in equity. In the absence of effectivity, sheet at acquisition costs and subsequently at market values. The the differences are included in operating results. The amounts recording of gains or losses depends on the type of items to be recorded as a special item under equity are included in operating hedged. At the time of concluding a hedge transaction, the results during the same period in which the planned hedge company classifies certain derivatives either as a hedge of the fair transaction impacts the income statement. The gains or losses value of a reported asset or a reported liability (fair value hedge), from derivative financial instruments used as a fair value hedge as a hedge of a planned transaction (cashflow hedge) or as a and the respective gains or losses from the hedged item are hedge of a net investment in an economically independent recognized in operating results. foreign subsidiary.

Changes in the market value of derivatives which are used for and qualify as a cashflow hedge and which have proved to be

Segment Reporting Reporting is primarily based on geographical regions. Since PUMA the internal reporting structure; i.e., according to the footwear, is engaged in only one business field, namely the sporting goods apparel and accessories product segments. industry, allocation for the purpose of secondary reporting follows

Cash and Cash Equivalents Cash and cash equivalents include liquid assets and bank total amount of cash and cash equivalents is consistent with the balances. Bank balances that are not required to finance current cashflow statement. assets are invested at terms of presently up to six months. The

68 Inventories Inventories are valued at acquisition or manufacturing costs or at adjustments are determined in a uniform manner throughout the the lower net realizable values derived from the selling price at Group, depending on the age of the goods concerned. Risks due the balance sheet date. As a general rule, the acquisition cost of to fashion trends are adequately taken into account. merchandise is determined using the average cost method. Value

Receivables and Other Short-term Assets Trade receivables and other receivables as well as financial recognizable risks are sufficiently accounted for in the form of assets are stated at nominal value net of value adjustments. All individual risk assessment or on the basis of historical values.

Property, Plant and Equipment Property, plant and equipment are stated at acquisition cost net of accumulated depreciation. The depreciation period depend on the item’s useful life. As a general rule, the straight-line method of depreciation is applied. The useful life depends on the type of assets involved:

Depreciation period

Buildings 10 to 50 years Machines, machine equipment and technical equipment, business and factory equipment 3 to 10 years

Cost of maintenance and repair is recorded as expense at the and equipment; they are valued at the amount of the fair value time of origin. Significant improvements and renewals are or the lower present value of the minimum lease payments when capitalized. Interest on outside capital is reported as current recognised for the first time and net of accumulated depreciation expense. in subsequent accounting periods.

Leased items regarded as significant in terms of their amounts and qualifying as finance leasing are shown under property, plant

Goodwill Goodwill is valued at acquisition costs net of accumulated amortization using the straight line method and assuming a useful life of 15 years.

69 Other Intangible Assets Acquired intangible assets largely consist of concessions, amortisation period is between three to five years, whereby the industrial property rights and similar rights; they are valued straight-line method is applied. at acquisition costs net of accumulated amortisation. The

Extraordinary Depreciation and Amortisation Property, plant and equipment, intangible assets and goodwill are value of the asset. If the recoverable value is lower than the book subject to extraordinary depreciation or amortization if there are value, the asset is written down to the recoverable amount (IAS indications of impairment in the value of the asset involved. In 36). If the reason for extraordinary depreciation or amortization such a case, the recoverable amount (the higher amount from net no longer exists, the asset is revalued; the revaluation amount realizable proceeds and utility value), is compared with the book may not exceed the amount of acquisition costs.

Other Long-term Financial Assets Other long-term financial assets are stated at acquisition non-interest bearing assets are discounted to their present costs; they include loans and other assets. As a general rule, values.

Financial Liabilities As a general rule, financial liabilities also include the portion of long-term loans with residual terms of up to one year at most.

Other Liabilities Liabilities are reported at their repayable amounts. Liabilities present value, respectively, and are extrapolated by the from finance leasing agreements are reported at the amount of repayment proportion of the lease instalments paid. the present value of the minimum leasing values or the lower

Provisions for Pensions and Similar Commitments In addition to defined benefit plans, some companies intro- service. No use is made of the 10 percent ‘corridor’ approach duced defined contribution plans which, apart from current described in IAS 19.92. The provision is reduced by the value of contributions, do not involve any further pension commitment. the plan assets. The service cost and interest component are For defined benefit plans the Projected-Unit-Credit-Method is disclosed within personnel expenses. In the event of defined used in general. This method not only accounts for annuities and contribution plans, the contribution is recognised within accrued pension benefits known at the balance sheet date, but personnel expenses; a provision for pensions is not necessary for also for expected salary and annuity increases. Actuarial gains this type of pension plan. and losses are distributed over the average residual term of

70 Other Provisions In accordance with IAS 37, other provisions are recorded to settlement amount; they are not set off against positive income. account for all risks and obligations vis à vis third parties Provisions are also created to account for unfavourable contracts that result from past transactions or events where amounts or where unavoidable costs exceed the economic benefit expected maturities were uncertain. The provisions are stated at their from the contract.

Treasury Stock Treasury stock is stated at the market price valid at the date of as “Treasury Stocks”; at present it is not planned to call-in the acquisition including incidental acquisition costs, and recorded shares. under equity capital. The company keeps the repurchased shares

Equity Participation Plans/Management Incentive Program In 1996 PUMA introduced a Management Incentive Plan for the recognised at the time of issue or at the balance sheet date, Board and Management of PUMA AG and its subsidiaries. The respectively (SAR). Any expense that may arise is recorded as share-based remuneration systems encompass convertible personnel expense and booked against equity (SOP), other pro- bonds, stock options (SOP) and stock appreciation rights (SAR). visions or other liabilities (SAR), respectively. In accordance with the intrinsic value method, the programs are

Recognition of Sales Sales are recognized and included in profits at the time of the transfer of risk. Sales are disclosed net of returns, discounts, rebates, and sales-dependent advertising contributions.

Royalty and Commission Income Royalty income is treated as income in accordance with the accrual basis. Commission income is invoiced to the extent that invoices to be presented by the licensees. In certain cases, the underlying purchase transaction is deemed realized. values must be assessed in order to permit accounting on an

Advertising and Promotion Expenses The company recognizes advertising expenses at the time they originate. Generally, promotion expenditure is spread over the contract term as an expense on an accrual basis.

71 Product Development The company is continuously engaged in developing new origin; they are not capitalized since the criteria specified in IAS products in order to comply with market requirements or market 38 are not fulfilled. changes. The costs are recorded as an expense at the date of

Financial Result The financial result includes interest income from financial expenses; where such effects resulting from derivative financial investments and interest expense from credits. In general, effects instruments are to be allocated directly to an underlying transac- from exchange rate fluctuations are included in general tion, disclosure is made in the respective income statement item.

Income Taxes Incomes taxes are determined in accordance with local tax regulations in the countries where the respective company is active.

Deferred Taxes Deferred taxes from time differences between the tax and the the balance sheet date. Deferred taxes may also result from commercial balance sheet valuation of individual group accounting procedures which are neutral in their effects on companies and from consolidation procedures are netted profits. according to tax country and disclosed either as deferred tax assets or deferred tax liabilities. Deferred tax assets may also Deferred tax assets are stated only to the extent that realisation include tax reduction claims resulting from the expected use of of the respective tax advantage is probable. Value adjustments existing losses carried forward to subsequent years if their are created on the basis of past results of operations and realization is ensured with sufficient certainty. Deferred taxes are business expectations for the near future, if this criterion is not determined on the basis of tax rates applicable for reversal in the fulfilled. individual countries, and are in effect, or announced effect, on

Assumptions and Estimates Preparation of the consolidated financial statements may involve deviate from such assumptions and estimates. Any changes are assumptions and estimates which have an impact on the amount recognized as expense or income at the time of receiving the and disclosure of the reported assets and liabilities, on income, respective information. expenses and contingencies. Actual values may in some cases

72 3. Liquid Assets

Liquid assets amounted to € 369.3 million (previous year: item largely includes fixed-term deposits and money market € 190.6 million) as at 31 December 2004; in addition to cash, this funds. There were no restraints on disposal.

4. Inventories

Inventories are divided into the following main categories:

Dec. 31, 2004 Dec. 31, 2003 € million € million

Raw materials and supplies 0.5 1.2 Finished goods and merchandise Footwear 106.9 95.8 Apparel 71.9 58.6 Accessories/Others 18.2 13.3 Goods in transit 54.1 70.7 Inventories, gross 251.6 239.5 Value adjustments -50.5 -43.3 Inventories, gross 201.1 196.2

Of the total amount of reported inventories, the amount of € 57.5 million (previous year: € 29.7 million) is stated at its net realizable value.

5. Trade Receivables and other Receivables

Receivables consist of the following:

Dec. 31, 2004 Dec. 31, 2003 € million € million

Trade receivables 188.2 171.4 Other receivables 16.0 16.1 Prepaid expenses 5.5 4.9 Receivables, gross 209.7 192.4 Value adjustments -20.1 -16.8 Receivables, net 189.6 175.6

The present value of this item corresponds to the book value. As There were no receivables due from management or supervisory a rule, receivables are due within one year. bodies.

73 6. Other Short-term Financial Assets

This item includes the valuation of derivative financial existing balance sheet items and future transactions. The value instruments that existed as of the balance sheet date and where recorded corresponds to the market value valid on the balance recognized as assets. The financial instruments as of the balance sheet date. sheet date include forward exchange transactions used to hedge

7. Deferred Taxes

Deferred taxes relate to the following items:

Dec. 31, 2004 Dec. 31, 2003 € million € million Accumulated tax losses carried forward 2.3 3.0 Long-term assets 4.0 3.4 Short-term assets 21.6 18.2 Provisions and other liabilities 16.5 12.8 From netting in equity with neutral effect on profits 15.7 7.2 Value adjustments -2.0 -2.3 Deferred tax assets 58.1 42.2 Long-term assets 13.3 7.0 Short-term assets 1.4 1.3 Provisions and other liabilities 1.4 0.6 Deferred tax liabilities 16.1 8.9 Deferred tax assets, net 42.0 33.3

As of December 31, 2004 tax losses carried forward totaled accounting, the tax expense is € 2 million higher. Excluding this € 5.4 million (previous year: € 9.4 million). This leads to deferred effect, the tax ratio for financial year 2004 would be 29.6% which tax assets of € 2.3 million (previous year: € 3.0 million). represents a 0.5%-pts. deviation from the current 30.1% tax rate Following value adjustment, the tax losses carried forward were as disclosed in the annual financial statement. included in deferred tax assets to the amount of € 0.4 million (previous year: € 0.6 million). The tax losses carried forward Deferred taxes from items recorded in equity with neutral effect primarily relate to inactive companies so that use of these tax on profits (hedge accounting) are included to the amount of losses seems unlikely. € 15.7 million (previous year: € 7.2 million).

Other than in the previous year, deferred tax liabilities for Deferred tax assets and liabilities are netted if they relate to the withholding tax from possible dividends on all distributable same tax authority. Accordingly, they are disclosed in the balance profits of subsidiaries are included. Due to this change in sheet as follows:

Dec. 31, 2004 Dec. 31, 2003 € million € million

Deferred tax assets 51.6 36.5 Deferred tax liabilities 9.6 3.2 Deferred tax assets, net 42.0 33.3

74 8. Property, Plant and Equipment

Property, plant and equipment at book value consist of the following:

Dec. 31, 2004 Dec. 31, 2003 € million € million

Land and buildings, including buildings on third party land 31.4 20.1 Technical equipment and machines 0.9 0.9 Other equipment, factory and office equipment 48.8 36.3 Payments on account and assets under construction 3.6 9.1 84.7 66.5

The book values of property, plant and equipment are derived item also includes down-payments on the new administration from acquisition costs. Accumulated depreciation of property, building in Switzerland and down-payments on capitalizable plant and equipment amounted to € 51.1 million (previous year: renovation costs. € 41.2 million). The breakdown of property, plant and equipment and their Property, plant and equipment include leased assets to the development in the 2004 financial year are shown in the amount of € 0.8 million (previous year: € 1.1 million) which Appendix attached to the consolidated financial statements. largely relate to operating and office equipment in various Extraordinary depreciation to the lower net realizable value due subsidiaries (mainly Australia). to impairment in value was not effected in financial year 2004.

Last year, payments on account and assets under construction included down-payments on the extension to the administration building in Herzogenaurach which was completed and also occupied in financial year 2004. As of December 31, 2004, the

9. Goodwill

This item includes goodwill associated with the acquisition and to the amount of € 1.7 million was recorded during the financial initial consolidation of companies in Great Britain, Sweden and year. Extraordinary amortisation due to impairment in value was Japan, net of accumulated amortisation. Scheduled amortisation not necessary in the financial year.

10. Other Intangible Assets

The development of this item during financial year 2004 is shown retail activities. Extraordinary amortisation due to impairment in in the Appendix attached to the consolidated financial value was not necessary. statements; it mainly includes asset values connected with own

75 11. Other Long-Term Financial Assets

This item is made up as follows:

Dec. 31, 2004 Dec. 31, 2003 € million € million

Loans 0.9 1.7 Other assets 4.4 2.4 5.3 4.1

The development for 2004 is presented in the Appendix to the consolidated financial statements. Extraordinary depreciation due to impairment in value was not necessary.

12. Shares in Associated Companies

The shares in associated companies concern “Sportlifestyle of December 31, 2004 remained unchanged at € 0.6 million in Majazacilik Sanayi ve Ticaret A.S.”, Istanbul, Turkey, with a comparison with the previous year. stake of 35%. Due to the balanced result, the value recorded as

13. Financial Liabilities

Financial liabilities consist of bank loans with residual terms of the amount of € 12.9 million (previous year: € 16.8 million) less than 12 months. There were no long-term bank loans as there were guaranty credits (largely documentary credits) to the of the balance sheet date. amount of € 4.8 million (previous year: € 5.7 million) as of December 31, 2004. At that date the Company had, in addition Credit lines granted to the company totaled € 210.6 million to cash and cash equivalents, unused credit lines to the amount (previous year: € 195.3 million); they may be used either for bank of € 192.8 million (previous year: € 172.8 million). loans or guaranteed credits. In addition to financial liabilities to

76 14. Trade Payables and other Liabilities

The present value of trade payables and other liabilities corresponds to the book value.

Dec. 31, 2004 Dec. 31, 2003 of which of which due within Total Total due within 1 year 1 year € million € million € million € million

Trade payables 135.5 136.9 132.6 132.6

Other liabilities Liabilities from taxes 15.4 15.4 7.1 7.1 Liabilities from social security contributions 2.5 2.5 2.3 2.3 Liabilities to employees 30.2 30.2 24.5 24.5 Liabilities from the market valuation of forward exchange transactions 32.7 59.6 24.7 24.7 Leasing liabilities 0.4 0.4 0.5 0.5 Other liabilities 14.4 15.2 9.9 9.4 95.6 123.3 69.0 68.5 231.1 260.2 201.7 201.1

15. Pension Provisions

Pension provisions totaled € 21.2 million (previous year: € 18.5 The significant portion of pension provisions (74%) concerns million) as of the balance sheet date and are reduced by the PUMA AG. The calculation of pension provisions at PUMA AG is value of the plan assets. The present value of plan assets does based on the Dr. Klaus Heubeck mortality tables of 1998. not include own financial instruments. The plan assets saw an Valuation is in accordance with the projected unit credit method actual increase in value of € 0.8 million (previous year: € 1.1 as defined in IAS 19. The PUMA AG pension plan covers general million) in 2004. commitments that are, as a rule, based on maximum pension payments of € 127.82 for each month and each entitled Of the total provision amount, € 15.7 million (previous year: employee, and on individual commitments. € 13.4 million) is attributable to PUMA AG, € 3.1 million (previous year: € 3.2 million) to the sub-group in Sweden, and € 2.4 million The following actuarial assumptions were applied concerning (previous year: € 1.9 million) to the other companies. PUMA AG’s pension plans:

Dec. 31, 2004 Dec. 31, 2003

Discount rate 4.5% 5.5% Future pension increases 2.25% 2.25% Fluctuation rate 1.5% 1.5%

77 The pension provision for the Group is calculated as follows:

Dec. 31, 2004 Dec. 31, 2003 € million € million Present value of non-funds financed pension claims pursuant to actuarial opinion 22.5 17.6 Present value of funds-financed pension claims 12.3 10.7 Net of the fair value of the funds assets -10.0 -8.0 Short cover/surplus cover of the fund assets 2.3 2.8 Present value of pension claims 24.8 20.4 Adjustment amount due to non-recorded actuarial gains/losses (-) -3.6 -1.8 Pension provision, Dec. 31 21.2 18.5

The development of the pension provision for the Group is structured as follows:

Dec. 31, 2004 Dec. 31, 2003 € million € million

Pension provision, Dec. 31, previous year 18.5 17.9 Currency translation 0.0 0.0 Pension expense 4.9 2.1 Pension payments -2.2 -1.5 Pension provision, Dec. 31 21.2 18.5

The pension expense is structured as follows:

Dec. 31, 2004 Dec. 31, 2003 € million € million Expense for pension claims involved during the reporting year 3.9 1.1 Interest expense for acquired pension claims 1.5 1.3 Expected income on plan asset -0.6 -0.5 Adjustment amount due to recorded actuarial gains/losses 0.1 0.2 Expense for defined benefit plans 4.9 2.1 Expense for defined contribution plans 1.0 0.7 Total 5.9 2.8

78 16. Tax Provisions

Dec. 31, 2003 Dec. 31, 2004 Currency Utilization Release Addition adjustments, reclassifications € million € million € million € million € million € million Tax provisions 27.1 -0.8 -22.4 -0.7 30.5 33.7

Tax provisions mainly include the income taxes due but not yet attention is drawn to Paragraph 7 of these Notes. The provision paid for 2004 as well as expected tax payments for previous will probably lead to an outflow of cash in the next financial year. years; they do not include deferred taxes. In this respect,

17. Other Provisions

Dec. 31, 2003 Dec. 31, 2004 Currency Utilization Release Addition adjustments, reclassifications € million € million € million € million € million € million Other provisions: Warranties 10.7 -0.5 -7.1 -0.6 9.2 11.7 Purchase risks 7.0 -0.3 -2.9 -3.0 5.1 5.9 Others 31.3 -0.5 -1.8 -1.9 9.0 36.2 49.0 -1.3 -11.8 -5.4 23.3 53.8

The warranty provision is determined on the basis of the Other provisions are primarily recorded to account for risks that historical value of sales generated during the past six months. may arise from litigation, anticipated losses and other risks. It is expected that most of these expenses will fall due within Depending on the procedure applied in each case, it is expected the first six months of the next financial year. that the amount will largely be utilised within the next two years.

Purchase risks primarily relate to materials risks and to the forms needed for footwear manufacture. The item also includes anticipated losses associated with purchase transactions. The provision will probably lead to payment in the following year.

18. Minority Interests

The compensating item for minority interests concerns the interests is 49% for PUMA Chile and PUMA Portugal respectively, associated companies in PUMA Chile, PUMA Portugal and PUMA and 29% for PUMA Sports Distributors. Sports Distributors (South Africa). The stake held in the minority

79 19. Equity

Subscribed Capital Subscribed capital amounted to € 42.7 million as of the balance “Fidelity Management & Research Company, Boston, USA” once sheet date; it is subdivided into 16,666,714 shares of stock. In again reported that the 5% hurdle had been exceeded and that 2004, the subscribed capital was increased by € 1.1 million or it presently holds 5.11%. In early 2005, Fidelity announced that 433,000 shares of stock. As of the balance sheet date, the it had again fallen below the 5% investment quota. Apart from company holds 605,000 shares of own stock (see below “Own this, the company is not aware of any shareholder holding or Shares”). Capital reserves were increased by € 22.1 million to exceeding 5% of subscribed capital. € 72.5 million.

In a letter dated July 28, 2004, the firm of “Fidelity Management & Research Company, Boston, USA”, announced that it had fallen below the investment quota of 5%. On December 1, 2004,

Cashflow Hedges Equity capital saw netting with neutral effects on profits in included, as far as these can be allocated to future transactions. accordance with IAS 39 for the first time in 1999. This item is The item to the amount of € -30.3 million (PY: €-10.8 million) is disclosed in the statement of “Changes in Equity”. In addition to already reduced by deferred taxes of € 15.7 million (PY: € 7.2 the change in market value from derivative financial instruments, million). currency-related changes resulting from balance sheet items are

Own Shares / Treasury Stock The Shareholders’ Meeting on April 20, 2004 authorised the the last trading day prior to acquisition. The Board decided to Board to acquire own shares amounting up to 19% of share make use of this authorisation and decided upon an initial capital for a period of 18 months to enable flexible management buyback of up 800,000 shares of stock. A total of 605,000 PUMA of capital requirements. If acquired through the stock exchange, shares (PY: 175,000 shares of stock) were held as treasury stock the acquisition price per share may not be higher or lower than as of the balance sheet date. The amount invested to this end 10% of the closing price for the company’s shares with the same totaled € 100.2 million. features in XETRA trade (or a comparable successor system), on

80 Authorized Capital Pursuant to Article 4, items 6 and 7 of the PUMA AG Articles of Supervisory Board, to increase the nominal capital up to May 13, Association, the Board is authorized, with the approval of the 2007

• through the issuance of new shares once or repeatedly in authorized, with the approval of the Supervisory Board, to exchange for contributions in cash by a total of up to exclude the shareholders’ subscription right in order to avoid € 11,520,000.00; the shareholders are to be granted a fractional amounts (Authorized Capital I); subscription right. However, the Board of Management is and

• through the issuance of new shares once or repeatedly in equipped shares at the time of final determination of the issue exchange for contributions in cash by a total of up to price. If the Board of Management does not make use of the € 3,840,000.00. Given the approval of the Supervisory Board, authorization to exclude the subscription right, it may exclude an exclusion of the subscription right is admissible either in full shareholders’ subscription rights – with the approval of the or in part in the event of a capital increase in exchange for cash Supervisory Board – only in order to compensate for possible contributions, if the issue price of the new shares does not fall fractional amounts (Authorized Capital II). significantly below the market price of already listed, equally

Conditional Capital Pursuant to Article 4 (items 3 and 4) of the Articles of Association, In addition, pursuant to Article 4 (item 5) of the Articles the capital was subject to a conditional increase by € 0.8 million of Association, further conditional capital to the amount of (conditional capital 1997 and 1999). The conditional capital € 3.9 million was created with the purpose of financing a total serves to finance the convertible bonds issued to management 1,530,000 stock options. The stock options are or were issued within the scope of the long-term investment program (see to management within the scope of the Stock Option Program. Paragraph 20 of these Notes). Most of the convertible bonds have As of December 31, 2004, conditional capital amounting to already been converted. Conditional capital as of the balance € 1.9 million is available. sheet date amounts to € 0.3 million.

Dividends The amounts eligible for distribution relate to the balance sheet 2003. The increase in dividend distribution corresponds to the profit of PUMA AG which are determined in accordance with increase in net earnings German Commercial Law. Use of balance sheet profit of PUMA AG: The Board of Management proposes that a dividend of € 1.00 per share or a total of € 16.1 million from the PUMA AG balance sheet profit be approved for distribution to the shareholders. A dividend of € 0.70 per share or, in total, € 11.2 million was distributed for

2004 2003 Balance sheet profit of PUMA AG as of Dec. 31 € million 18.5 78.1 Dividend per share € 1.00 0.70 Number of shares outstanding on Dec. 31 share of stock 16,061,714 16,058,714 Dividend, total € million 16.1 11.2 Carry-forward to the new accounting period € million 2.4 66.8

81 20. Equity Participation Plans/Management Incentive Program

In 1996 PUMA introduced long-term incentive plans with the aim appropriation rights (SAR) were implemented as long-term of retaining management staff in the company over the longer incentives: term. Convertible bonds, stock option programs (SOP) and stock

Convertible Bonds Convertible bonds were issued to management from 1996 to payment for the acquisition of one share is to be made to the 1999. At the balance sheet date, bonds from the 1999/2009 amount by which the conversion price exceeds the nominal tranches which are held by management only were still open for amount of the convertible bond. The term of the convertible conversion. The Board does not hold any convertible bonds. Each bonds is ten years; they may be converted following a blocking € 2.56 (originally DM 5.00) entitles to conversion into one of the period of two years as from the date of issue. company’s shares. When exercising a conversion right, a cash

Development in 2004:

Issue date Number Converted in Lapsed inIn circulation as of Dec. 31 Conversion issued 2004 2004 price 2004 2003 1997/2007 Tranche Oct. 1, 1997 220,000 1,000 - 0 1,000 € 32.88 1999/2009 Tranche Dec. 9, 1999 295,000 15,500 - 1,000 16,500 € 16.64

SOP A Stock Option Program was introduced within the scope of the the date of issue of the respective tranche, in addition to a 15% conditional capital created in 2001. The conditional capital performance target. On the basis of the respective share price, increase is used to service the option rights of members of the each share acquisition leads to a value appreciation which results PUMA AG Management Board, members of the executive bodies after deduction of the corresponding exercise price. From 2001 to of affiliated companies, the executive staff of PUMA AG and 2004, option rights were issued to management in the respective affiliated companies. Entitled persons are given the opportunity tranches. The Board exercised a total of 130,500 options from to acquire PUMA shares at the exercise price within a 5-year Tranche II (2002/2007) during the financial year. Furthermore, as period and following a 2-year blocking period as from the date of of the balance sheet date, the Board holds a total of 57,000 units issue. The exercise price is the average value of the closing price from Tranche 2003/2008, and 137,700 options from Tranche in XETRA trading during the last five trading days prior to the date 2004/2009. For more details, see Paragraph 31 of these Notes. of acquisition of the option rights or, if higher, the closing price on

Development in 2004:

Issue date Number Converted in Lapsed inIn circulation as of Dec. 31 Exercice issued 2004 2004 price 2004 2003 2001/2006 - Tranche I Aug. 29, 2001 444,714 19,000 0 17,500 36,500 € 24.61 2002/2007 - Tranche II April 04, 2002 435,000 397,500 0 30,500 428,000 € 56.38 2003/2008 - Tranche III March 31, 2003 190,000 0 2,000 186,000 188,000 € 85.68 2004/2009 - Tranche IV March 31, 2004 459,000 0 1,500 457,500 0 € 206.20

82 SAR The long-term incentive program was extended by Stock settlement is defined which applies during and within the scope Appreciation Rights in 2004. On April 25, 2004, 100,000 options of the existing employment contract. Comparable programs have at an exercise price of €200.00 were issued. The term of the been agreed for the years from 2005 to 2008, whereby the non-forfeitable option rights is five years as from the date of exercise price is determined from the average of closing prices of issue; they may be exercised following a 2-year blocking period the rights distribution (on April 25 in each case) during the five at the earliest. An exercise gain arises from the positive difference preceding days, plus an exercise hurdle of 10%. As of December between the current price of the share given a virtual sale and 31, 2004, 100,000 options which are held by the Board are the exercise price, whereby a minimum exercise gain of 10% and outstanding. a maximum exercise gain of 50% of the exercise price upon

21. Personnel Expenses

Personnel expenses are made up as follows:

2004 2003 € million € million

Wages and salaries 124.4 100.2 Social expenditure 18.8 14.8 Expenses for pension schemes and other personnel expenses 14.3 11.6 Total 157.5 126.6

The annual average number of staff was as follows:

2004 2003 Marketing 147 130 Sales/Retail 1,726 1,260 Product Management/Development 313 258 Sourcing/Logistics/Production 797 737 Central Units 492 441 Total 3,475 2,826

At year-end the company employed a total of 3,910 people (previous year: 3,189).

83 22. Selling, General and Administrative Expenses

In addition to personnel expenses, advertising and selling costs, Total costs in the field of product development and design legal and consulting costs, rental / leasing expenses, travel costs, amounted to € 36.9 million or 2.4 % of sales (previous year: telephone and postage as well as other general expenses were € 29.9 million or 2.3 %). Other selling, general and major items. The amount of € 34.3 million (previous year: administrative expenses came to € 202.0 million or 13.2 % € 22.1 million) is attributable to rental / leasing expenses. (previous year: € 183.3 million or 14.4 %).

In addition to income typical of the business, other operating income includes releases of provisions, currency gains, value adjustments no longer needed, and payments received for receivables written down. Most of the income is directly associated with selling, administration and general expenses.

Broken down according to functional areas, marketing and retail expense totaled € 214.6 million, or 14 % of sales (previous year: € 163.9 million or 12.9 %). In addition to costs of materials, this item also includes other types of costs (e.g. personnel costs).

23. Financial Result

The financial result is made up as follows:

2004 2003 € million € million Other interest and similar income 7.0 2.3 Interest and similar expenses -1.3 -1.4 Financial result 5.7 0.9

84 24. Taxes on Income

2004 2003 € million € million Current income taxes Germany 33.7 26.7 Other countries 78.7 59.1 112.4 85.8 Deferred taxes -0.7 -1.6 111.7 84.2

Current income taxes in Germany relate to corporation tax, corporation tax. This resulted in a mixed tax rate of 36.91% in solidarity surcharge and trade tax. the financial year

In general, PUMA AG and its German subsidiary are subject Reconciliation from the theoretical tax expense to effective tax to corporation tax plus solidarity surcharge and trade tax which expense: is deductible upon determination of the income subject to

2004 2003 € million € million Earnings before income taxes 370.7 264.1 Theoretical tax expense Tax rate of the AG = 36.91% (previous year: 36.85%) 136.8 97.3

Difference from tax rates in other countries -34.1 -20.2 Other tax effects: Intra-group entries 6.5 1.2 Goodwill amortisation 0.2 1.5 Release of value adjustment on deferred taxes -0.3 -4.6 Tax provisions 1.5 5.4 Other non-deductible expenses and income and consolidation and other effects 1.1 3.7 Effective tax expense 111.7 84.2 Effective tax rate 30.1% 31.9%

25. Earnings per Share

Earnings per share are determined in accordance with IAS 33 by from the Management Incentive Program. The share option dividing group earnings by the average number of outstanding program has a diluting effect on profits in the financial year. The shares. A dilution of this indicator results from potential shares calculations are presented below:

2004 2003 Net earnings € million 257.3 179.3 Average number of shares in circulation in shares of stock 16,025,243 15,931,607 Diluted number of shares in shares of stock 16,352,761 16,448,893

Earnings per share € 16.06 11.26 Earnings per share, diluted € 15.74 10.90

85 26. Management of the Currency Risk

The company is exposed to currency risks which result from an currency to up to twenty-four months of the net demand. In so imbalance in the worldwide cashflow. This imbalance is largely doing, the planning period for 2005 and 2006 is hedged against due to the high level of sourcing in US Dollar in the Far East. Sales adverse currency effects. are to a great extent invoiced in other currencies; in addition, the The net demand or net surplus results from the demand for a Company earns royalty income mainly in Japanese YEN (JPY) certain currency net of expected income in the same currency. As and USD. The resulting assets and liabilities are subject to a general rule, forward exchange deals are used to hedge exchange-rate fluctuations from the date of their origin up to exchange rate risks. realization. For accounting purposes, hedging transactions are clearly linked The PUMA Group uses derivative and primary hedging to certain parts of the overall risk position. As of the balance instruments to minimize the currency risk arising from currency sheet date, forward exchange deals related almost exclusively to fluctuations in compliance with an intra-group Group guideline. the purchase of USD and EUR and the sale of JPY and USD Derivative transactions are concluded if a hedging requirement concluded with renowned international financial institutions only. arises concerning future transactions after netting existing The credit risk is therefore assessed as being very low or unlike- foreign currency receivables and liabilities. In accordance with the ly. At present, the terms of the derivatives are up to twenty-four Group’s treasury principles, no derivative financial instruments months. The contracts are exclusively used to hedge contracts are held for trading purposes. As a general rule, derivatives are already concluded, or where conclusion is expected. combined with the associated underlying transactions to valuation units (hedge accounting) and, to this extent do not The nominal amounts and market values of open currency impact the net income for the year. hedging transactions, largely related to cashflow hedging, are structured as follows: The Company usually secures its net demand or net surplus of the respective currencies on a rolling basis twelve months in advance. Due to a further weakening of the US Dollar in comparison with the Euro and other currencies in the past financial year, the company extended the hedging period for this

Nominal amount Nominal amount Market vlaue Market value Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003 € million € million € million € million

Total forward exchange transactions 724.6 514.8 -59.6 -22.8

The nominal amount corresponds to the amounts of the Financial Assets or Other Liabilities in accordance with IAS 39, respective hedging transactions as agreed upon between the and offset against equity with neutral effects on profits in as parties involved. The market value is the amount to which the much as the hedging transaction relates to future transactions. financial instrument would be traded between interested parties on the balance sheet date. As a general rule, the market values Management does not expect any adverse influences on the are determined on the basis of market values communicated by Group’s financial position from the use of derivative financial the banks involved. The market value is reported under Other instruments.

86 27. Segment Reporting

In primary segment reporting, as a first step, sales and gross Gross assets include assets used to generate the operating result profit are shown according to the geographical region where the of the respective segment. Non-operating assets including tax sales are realized (according to customers’ head offices); in a deferrals and group assets which cannot be allocated are second presentation, sales are allocated to the region where the disclosed in the Central Units / Consolidation column. head office of the respective group company is located. Intercompany sales are eliminated under Central Units / Liabilities include the respective outside capital from the Consolidation. The allocation of the remaining segment viewpoint of the companies allocated. Intercompany assets information is also determined on the basis of the respective and liabilities are eliminated in the Central Units / Consolidation group company’s head office. The sum totals equal the amounts column. on the income statement or on the balance sheet, respectively. Investments and depreciation/amortisation relate to additions to The operating result for the respective region was adjusted and depreciation/amortisation of property, plant and equipment concerning intra-group settlements such as royalty and and of intangible assets during the current financial year. commission payments. Worldwide royalty income, largely realized by PUMA AG, the cost of international marketing, product Based on the internal reporting structure, secondary segment development and other international costs are included under data is allocated to the Footwear, Apparel and Accessories Central Units / Consolidation. Regional allocation with respect product categories. The operating results and most of the asset to the sales business would not be reasonable. and liability items cannot be allocated in a reasonable manner.

87 Segment reporting

Sales Internal External sales Gross profit Sales (total) sales with thrid parties by head office Regions by head office location of customers location 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 € million € million € million € million € million € million € million € million € million € million Europe 1,069.9 900.4 -67.7 -48.1 1,002.2 852.3 542.4 437.4 1,102.0 925.7 Asia/Pacific Rim 192.8 149.0 -11.8 -11.5 181.0 137.5 87.0 61.0 193.0 149.6 America 302.6 255.0 -0.0 -0.0 302.6 255.0 149.2 113.7 300.2 252.3 Africa/Middle East 44.5 29.2 0.0 0.0 44.5 29.2 15.3 8.0 14.6 6.2 Central Units/Consolidation -79.5 -59.6 1,609.8 1,333.7 -79.5 -59.6 1,530.3 1,274.0 794.0 620.0 1,530.3 1,274.0

Profit Gross assets Liabilities Investments Depreciation from operations (balance sheet total) Regions by head office location of customers 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 € million € million € million € million € million € million € million € million € million € million Europe 287.3 215.0 621.0 544.4 310.6 306.6 28.8 19.2 12.1 14.8 Asia/Pacific Rim 39.6 24.3 100.9 53.3 67.3 68.3 2.9 17.0 2.5 1.8 America 60.0 42.3 91.5 82.6 65.0 59.8 10.6 6.9 4.6 3.4 Africa/Middle East 3.8 0.9 5.9 4.4 5.8 4.2 0.4 0.2 0.1 0.1 Central Units/Consolidation -25.7 -19.3 110.5 15.5 -57.3 -122.6 0.0 0.0 -0.0 0.0 365.0 263.2 929.9 700.1 391.4 316.3 42.6 43.4 19.3 20.1

Breakdown of Sales and Gross Results by Product Categories

External Gross profit sales in % with third parties 2004 2003 2004 2003 € million € million Footwear 1,011.4 859.3 53.1% 49.5% Apparel 416.0 337.0 49.7% 47.1% Accessories 102.9 77.7 49.0% 46.6% 1,530.3 1,274.0 51.9% 48.7%

88 28. Notes to the Cashflow Statement

The cashflow statement has been prepared in accordance with Within financing activities, the total amount of € 79.2 million IAS 7 (revised); it is subdivided into cashflows from operating, (previous year: € 20.9 million) was spent on the buyback of own investing and financing activities. The indirect method is used to shares during the financial year. The dividend resolved for determine the cashflow from operating activities. The gross financial year 2003 to the amount € 11.2 million (previous year: cashflow, derived from earnings before taxes on income and € 8.7 million) was paid. The total amount of € 23.2 million adjusted for non-cash income and expense items, is determined (previous year: € 9.5 million) was obtained from the conversion within the cashflow from operating activities. of stock options issued to management.

In financial year 2004, the gross cashflow increased perceptibly Taking the cash used for financing activities totalling € 70.8 from € 280.6 million to € 385.6 million due to a significant million (previous year: € 23.4 million) and the currency-related improvement in profit. The cash from operating activities, change in cash and cash equivalents into account, there is a including the change in short term balance sheet items, amounts marked increase in liquid funds of € 178.8 million (previous year: to € 285.7 million (previous year: € 165.0 million). Payments for € 77.0 million). The company’s liquid funds thus total € 369.3 income taxes in the financial year totaled € 99.0 million (previous million (previous year: € 190.6 million) as of the balance sheet year. € 89.3 million), of which the amount of € 22.4 million date. concerns subsequent payments for previous years.

Cash used for investing activities totalling € 29.2 million was fully financed by the cash provided by operating activities. The remaining free cashflow amounts to € 256.6 million (previous year: € 107.4 million or € 137.7 million before acquisitions).

29. Contingencies

Dec. 31, 2004 Dec. 31, 2003 € million € million

Liabilities on bills discounted 1.3 1.5 Guarantees and warranties --

30. Other Financial Obligations

The Company’s other financial obligations relate to license, concerning the retail business is between 5 and 15 years. The promotion and advertising contracts. In addition, the company terms of all other rental and lease contracts are between 1 and 5 leases and rents offices, warehouses, facilities, a car park and years. also sales premises for its own retail business. The residual term of the lease contract for the logistics centre in Germany As of the balance sheet date, the Company’s financial obligations (operative leasing) is 6 years. The term of rental contracts were as follows:

Dec. 31, 2004 Dec. 31, 2003 € million € million From license, promotion and advertising contracts: 2005 (2004) 33.4 31.6 2006 - 2009 (2005 - 2008) 53.4 62.0

From rental and lease contracts: 2005 (2004) 29.5 22.3 2006 - 2009 (2005 - 2008) 90.8 63.2 as from 2010 (as from 2009) 48.4 31.1

89 31. Disclosures Concerning the Supervisory Board and the Board of Management

In accordance with a resolution of the Shareholders’ Meeting held form of options in accordance with the with long-term incentive on April 20, 2004, the Supervisory Board was reduced from 9 to plan (see paragraph 20 of these notes). In the financial year, 6 members. The fixed remuneration for Supervisory Board fixed remuneration amounted to € 3.9 million (previous year: members amounts to T-€ 50 for the Chairman and T-€ 25 for € 2.6 million), and variable remuneration amounted to each other Supervisory Board member. The Supervisory Board € 4.7 million (previous year: € 3.5 million). Share-based members who have left the company in financial year 2004 were remuneration in the financial year amounted to € 2 million. The remunerated on a pro rata temporis basis. Overall remuneration criteria applied to determine the adequacy of remuneration are, in the past financial year totaled T-€ 194 (previous year: T-€ 250). in addition to the functions and performance of the Board No variable remuneration exists. As of the balance sheet date, the member concerned, the financial situation, the performance and Supervisory Board members held a total of 2,100 shares future prospects of the company, taking peer companies into (previous year: 1,000 shares) or 0.0126% (previous year: account. 0.0062%) of the total shares as of the balance sheet date. There are no share-based remuneration systems for members of the Pension commitments vis à vis former Board members amounted Supervisory Board. to € 2.7 million (previous year: € 2.6 million); they are recorded as a liability within pension provisions. As in the previous year, Remuneration for the Board of Management includes, in addition retirement benefits amounting to € 0.1 million were paid to a to a fixed and variable component, a variable remuneration in the former Board member.

32. German Corporate Governance Code

The German Corporate Governance Code (DCGK) sets the Government Commission in the German Corporate Governance significant legal regulations recommendations for the guidance Code pursuant to Section 161 AktG, and made it permanently and monitoring of German companies listed on the stock available to the shareholders on the Company’s homepage exchange and includes standards governing responsible (www.puma.com). corporate management.

The Board and the Supervisory Board have made the required declaration concerning the recommendations issued by the

33. Events after the Balance Sheet Date

In January 2005, PUMA AG acquired the majority of the former the PUMA organisation. The acquisition does not impact on the distributor for Greece. The company will be consolidated with net assets, financial position and results of operations. effect as from January 1, 2005 and integrated immediately into

Herzogenaurach, January 24, 2005

The Board of Management

Zeitz Gänsler Heyd

90 Auditor’s Report

We have audited the consolidated financial statements of PUMA In our opinion, the consolidated financial statements give a true Aktiengesellschaft Rudolf Dassler Sport, Herzogenaurach, and fair view of the net assets, financial position, results of consisting of a consolidated balance sheet, consolidated income operations and cashflows of the Group in the financial year in statement, cash flow statement and notes to the consolidated compliance with IFRS. Our audit, which also extends to the group financial statements for the financial year from January 1 to management report prepared by Board of Management for the December 31, 2004. The preparation and content of the financial year from January 1 to December 31, 2004 has not led consolidated financial statements in accordance with the to any reservations. In our opinion, on the whole the group International Financial Reporting Standards (IFRS issued by the management report, together with the other information of IASB) are the responsibility of the Company‘s Board of the consolidated financial statements, provides a suitable Management. Our responsibility is to express an opinion as to understanding of the Group's position and suitably presents whether, based on our audit, the consolidated financial the risks of future development. In addition, we confirm that statements are in compliance with IFRS. the consolidated financial statements and the group management report for the business year from January 1 to December 31, We conducted our audit of the consolidated financial statements 2004 satisfy the conditions required for the Company’s in accordance with German auditing regulations and generally exemption from its duty to prepare consolidated financial accepted standards for the audit of financial statements statements and the group management report in accordance promulgated by the Institut der Wirtschaftsprüfer in Deutschland with German law. (IDW) and international standards on auditing (ISA). These standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial Frankfurt am Main, January 24, 2005 statements are free of material misstatement. Knowledge of the business activities and the economic and legal environment of the Group and evaluations of possible misstatements are taken into account in the determination of audit procedures. The evidence supporting the amounts and disclosures in the consolidated financial statements are examined on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by the Board of Management as well as evaluating the overall presentation of the consolidated financial statements. We believe Detlev Cuntz Dr. Ulrich V. Störk that our audit provides a reasonable basis for our opinion. German Public Accountant German Public Accountant

91 Report of the Supervisory Board

Dear Shareholders,

Once again, 2004 was a year with almost optimal conditions for Audit Committee efficient and target-oriented work. The Supervisory Board The Audit Committee received the PUMA Group’s financial data convened four times in 2004, meeting on February 27, April on a monthly basis and was thus in a position to track the 20/26, September 21, and November 16, 2004. In addition to development and orders position directly. Moreover, the Audit these meetings, the PUMA AG Board of Management Committee was concerned with accounting and performance- communicated with us orally and in writing; we were directly related issues and discussed these with Management. At the integrated in and informed about all important matters and meeting on February 26, 2004, the audit report for financial year decisions within the PUMA Group on a timely and ongoing basis. 2003 was discussed in depth with the auditor. After the In the past year we have dealt intensively with the business Supervisory Board had placed the audit engagement for development, the financial situation and our strategic orientation. financial year 2004, the Audit Committee discussed the audit engagement and focal points of the audit with the auditors Focus of Discussions during a telephone conference on December 9, 2004. The During the financial year, the Supervisory Board assumed the members of the Audit Committee are: Mr. Ohlsson (Chairman), tasks imposed on it by law and the statutes; the Supervisory Mr. Hofer and Mr. Hildel. Board supported and advised management and monitored its activities. Corporate Governance We welcome the German Corporate Governance Code (DCGK) Significant issues discussed at the Supervisory Board meetings which describes significant legal provisions and recommendations were the following in particular: governing the management and monitoring of listed companies; it also includes standards for responsible corporate management. • Audit and Approval of the 2003 Annual Financial Statements Almost all of these standards have been part of PUMA AG’s daily • Current Business Development corporate life for a long time. However, as expressly provided for • Corporate Planning for the Year 2005 and Further in the DCGK, we reserve our right not to observe individual Strategic Development recommendations should there be good reasons for not doing so. • Stock Option Program These reasons are explained in each case within the scope of the • Corporate Governance Code annual Compliance Declaration. The Compliance Declaration is • Annual General Meeting made available to our shareholders on a permanent basis on the • Personnel policy company’s homepage. • Share Buyback • Dividend Annual Financial Statements Approved • Current Issues of Business Policy PUMA AG’s annual accounts as prepared by the Board of Management, the consolidated financial statements, the Personnel Committee management report and the group management report, including The Personnel Committee met on two occasions in the past the underlying accounting system, have been audited and financial year; the committee dealt intensively with various provided with an unqualified auditors’ opinion by the auditors of personnel-related matters concerning the Board of Management PricewaterhouseCoopers, Wirtschaftsprüfungsgesellschaft GmbH, in order to ensure the Board’s continuity over the coming years. Frankfurt am Main; the auditors were appointed by the General The members of the Personnel Committee are: Mr. Werner Hofer Meeting on April 20, 2004 and commissioned by the Supervisory (Chairman), Mr. David Matalon, Mr. Thore Ohlsson and Ms. Board to audit the annual financial statements and the Katharina Wojaczek. consolidated financial statements.

92 In their report, the auditors arrive at the conclusion that PUMA’s performance, competence and critical support of our successful institutionalized risk management system pursuant to Section 91, corporate development. (2) Stock Corporation Act, is suitable for the early recognition of any developments that may endanger the company as a going Thanks to the Board of Management and Staff concern and for taking counteraction against same. To this end, The Supervisory Board wishes to express its great appreciation the Board of Management has informed the Supervisory Board at and thanks to the Board of Management, to the management of regular intervals about the assessment of market and sourcing the Group companies, the staff’s chosen representatives, and all risks, financial risks, including currency risks, and also about risks employees for their sustained successful performance and the that may arise in the organizational area. work involved in achieving it.

The financial statements documentation and the auditor’s audit reports as well as the proposal concerning the appropriation of retained earnings were available to all members of the Herzogenaurach, February 7, 2005 Supervisory Board in good time. The auditor reported about significant audit results and discussed these in detail with the On behalf of the Supervisory Board members of the Board of Management and the Supervisory Board at the meeting of the Audit Committee on February 6, 2005, and Werner Hofer at today’s Supervisory Board meeting. No inconsistencies Chairman occurred.

After thorough examination, we approve the annual financial statements prepared by the Board of Management and agree with the auditors’ results. No objections are raised. The Supervisory Board thus approves the annual financial statements as prepared by the Board of Management; the annual financial statements are hereby established. Furthermore, the Supervisory Board agrees with the Board of Management’s proposal that the dividend be raised from € 0.70 to € 1.00 per share. A total of € 16.1 million from the balance sheet profit will be used to this end. The remaining balance sheet profit shall be carried forward to the new accounting period.

Changes in the Supervisory Board Mr. James Douglas Packer, Bellevue Hill, Australia, and Mr. Peter Chernin, Los Angeles, USA, have, at their own wish and with effect from March 18, 2004 and March 22, 2004, respectively, resigned from office and left the Supervisory Board. Ms. Seiler, Employee Representative, has also resigned from the Supervisory Board with effect from April 20, 2004. We wish to take this opportunity to express our gratitude and to acknowledge their

93 The Board of Management

Jochen Zeitz (Chairman) Nuremberg, Germany

Chief Executive PUMA AG (Marketing, Sales, Finance, Administration, Human Resources)

Martin Gänsler (Deputy Chairman) Gersthofen, Germany

Chief Product Officer (Research, Development, Design and Sourcing, Environmental and Social Affairs)

Ulrich Heyd Nuremberg, Germany

Chief Legal Officer (Legal Affairs and Industrial Property Rights)

Group Executive Committee

Beside the Board of Management, the „Global Functional Directors“ comprise the „Group Executive Committee“:

Antonio Bertone (Brand Management)

Peter Mahrer (International Sales)

Dieter Bock (Finance)

Klaus Bauer (Operations, Human Resources)

94 Supervisory Board

Werner Hofer (Chairman) Katharina Wojaczek (Employees’ Representative) Hamburg, Germany Aurachtal-Falkendorf, Germany Lawyer Wörks council chairperson

Member of other Supervisory Boards or similar boards: - H & M Hennes & Mauritz AB, Stockholm/Sweden - Electrolux Deutschland GmbH (Chairman), Siegen/Germany - AEG Hausgeräte GmbH (Chairman), Nuernberg/Germany Erwin Hildel (Employees’ Representative) - D + H Mechatronic AG (Chairman), Hamburg/Germany Herzogenaurach, Germany - ISPAT Europe S.A., Luxemburg/Luxemburg Senior Group Head of Customer Service - ISPAT Germany GmbH, Duisburg/Germany - ISPAT Hamburger Stahlwerke GmbH, Hamburg/Germany - ISPAT Stahlwerk Ruhrort GmbH, Duisburg/Germany

James Douglas Packer (until March 18, 2004) Bellevue Hill, Australia Chairman of Publishing and Broadcasting Limited, Sydney/Australia Thore Ohlsson (Deputy Chairman) Falsterbo, Sweden Member of other Supervisory Boards or similar boards: President of Elimexo AB, Falsterbo/Sweden - Hoyts Cinemas Limited, Sydney/Australia - Foxtel Management Pty Limited, Sydney/Australia Member of other Supervisory Boards or similar boards: - Consolidated Press Holdings Limited, Sydney/Australia - Boss Media AB, Växjö/Sweden - Challenger Financial Services Group, Sydney/Australia - Bastec AB (Chairman), Malmö/Sweden - Elite Hotels AB, Stockholm/Sweden - Tretorn AB, Helsingborg/Sweden - T. Frick AB (Chairman), Vellinge/Sweden - Trianon AB, Malmö/Sweden Peter Chernin (until March 20, 2004) - Inpac AB, Lund/Sweden Los Angeles, U.S.A. President and Managing Director of The News Corporation Ltd., New York/USA / Sydney/Australia

Member of other Supervisory Boards or similar boards: Arnon Milchan - The News Corporation Limited, Sydney, N.S.W./Australia Herzelia, Israel - Monarchy Enterprises Holdings B.V., Rotterdam/Netherlands Producer - Fox Entertainment Group, Inc., New York/U.S.A. - Gemstar-TV Guide International, Inc., Los Angeles/U.S.A. Member of other Supervisory Boards or similar boards: - Hughes Electronic Corporation, New York/U.S.A - Monarchy Enterprises Holdings B.V., LLC, Rotterdam/The Netherlands - The Silver Lining Foundation, Aspen, Colorado/U.S.A..

Melanie Seiler (Employees’ Representative) (until April 20, 2004) Lonnerstadt, Germany Assistant Manager Inbound David Matalon Beverly Hills, U.S.A. President and CEO of New Regency Productions, Inc., Los Angeles/U.S.A.

Member of other Supervisory Boards or similar boards: - Monarchy Enterprises Holdings B.V., LLC, Rotterdam/The Netherlands - Regency Entertainment USA Corp., Los Angeles/U.S.A. - IVP Ltd., Kfar-Saba, Israel

95 puma.com